CEO ability and firm performance: Stock market and job market reactions

Mukherjee, Tarun K.; Nguyen, Huong

doi:10.1007/s12197-017-9390-1

Cited by 4 publications

(6 citation statements)

References 28 publications

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“…The relationships that we found between BoD characteristics and investment efficiency are consistent with the argument that greater BIND (Fauver et al, 2017; Rashid, 2018; Setia‐Atmaja et al, 2009), adequate performance compensation to the board (Faulkender et al, 2010; Lai & Liu, 2018; Nguyen, 2014), short‐term CEO career concerns (Jun & Min, 2017; Mukherjee & Nguyen, 2018), and non‐dual board leadership (Broye et al, 2017; Nasr & Ntim, 2018) significantly limit managers' opportunistic investment behaviour, and accordingly, these characteristics ultimately improve corporate investment efficiency.…”

Section: Resultssupporting

confidence: 84%

“…Prior literature confirmed that CEOs' careers depend on their past achievements and current performance. Mukherjee and Nguyen (2018) concluded that the stock market evaluates CEOs by grouping them – according to their previous performance – into better and good CEOs. They found that better CEOs could get a new job much faster, and their new companies were rewarded with higher long‐term returns.…”

Section: Prior Literature and Hypotheses Developmentmentioning

confidence: 99%

“…Finally, CEO career concern (CEOcareer) refers to keenness on own reputation, desire to receive high compensation, eagerness to become irreplaceable, and the wish to be more likely to be hired by new companies (Jun & Min, 2017). Despite the common use of CEO age and tenure as proxies for CEO career concerns in prior research (e.g., Mandala et al, 2018; Mukherjee & Nguyen, 2018; Ou et al, 2018; Xie, 2015; Yim, 2013; Zhang et al, 2015), we use the natural logarithm of CEO tenure to proxy CEO career concern because the CEO age has not been disclosed by the majority of Egyptian listed companies in their annual reports or websites.…”

Section: Research Design and Data Descriptionmentioning

confidence: 99%

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Strive towards investment efficiency among Egyptian companies: Do board characteristics and information asymmetry matter?

et al. 2021

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This study examines the impact of the board of directors (BoD) characteristics, namely BoD independence, compensation, leadership, and CEO career concerns on investment efficiency, using information asymmetry as a mediator. Using a sample of 326 firm‐year observations of non‐financial firms listed in the EGX 100 Index of the Egyptian stock market from 2014 to 2018, we find that board independence, board compensation, and board leadership are negatively associated with inefficient investment and information asymmetry, whereas the opposite is true for CEO career concerns. Furthermore, a positive relationship between information asymmetry and inefficient investment is documented. Finally, we find that information asymmetry mediates the relationship between the three BoD characteristics (i.e., board independence, leadership, and compensation) and inefficient investment. Conversely, it does not interfere with the relationship between CEO career concerns and inefficient investment. These findings are consistent in both under‐investment and over‐investment scenarios and across the pooled sample. Our findings contribute to corporate governance and investment literature by addressing new relationships, providing empirical evidence from a one‐tier board model in developing countries, and offering a useful explanation for the inconsistent results in prior studies. These findings help regulators, investors, and policymakers realize the importance of BoD characteristics in mitigating information asymmetry and improving corporate investment efficiency.

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Section: Resultssupporting

confidence: 84%

Section: Prior Literature and Hypotheses Developmentmentioning

confidence: 99%

Section: Research Design and Data Descriptionmentioning

confidence: 99%

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Strive towards investment efficiency among Egyptian companies: Do board characteristics and information asymmetry matter?

et al. 2021

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“…Following Bentley et al (2013), Custódio et al (2013), Higgins et al (2015) and Mukherjee and Nguyen (2018), we include several CEO"s and firm"s characteristics that are potentially correlated with general managerial ability, strategy and firm performance and risk as control variables. We describe these variables below.…”

Section: Control Variablesmentioning

confidence: 99%

Does the Fit of Managerial Ability with Firm Strategy Matters on Firm Performance

Cheng¹,

LI²,

Lin³

et al. 2020

JAFEB

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The study aims to answer why the previous studies find the positive or insignificant effect of the CEO's abilities on firm performance. Using 34,285 CEO-firm-year panel data from the U.S. publicly traded firms drawn from the BoardEx and EXECUXOMP database during from 1992 to 2014, the results show that the fit of the CEO"s generality or specialist ability with firm strategy matters on firm performance and risk. This study computes a discrete STRATEGY composite measure to construct firm strategy types, such as Prospect or Defend and use CEOs" résumés to construct an index of general skills that are transferable across firms and industries. The results find that generalist CEOs are more suitable for prospectors than specialist CEOs. Firm performance is much better when specialist CEOs work for Defenders. Although the firm performance is better too for the generalist CEOs who fit for the Prospect strategy, the firm"s risk is up too. The result suggests that firms need to consider their chosen business strategy to recruit and select CEOs Our findings provide direct evidence that the match between CEO"s ability and the firm"s strategy is crucial to firm performance and risk.

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“…Jung and Subramanian (2017) found that CEO talent is more important in more competitive markets with greater product substitutability, which highlights the effect of CEO ability on firm's strategic actions and competitiveness. More able CEOs are also better able to manage complex relationships with salient stakeholder groups and other influential secondary stakeholders such as the media and NGOs (Mukherjee and Nguyen, 2018). The unique set of abilities and extensive knowledge of more able CEOs allows them to better formulate and implement an efficient CSR strategy.…”

Section: Csr and Firm Performancementioning

confidence: 99%

The interplay of CEO ability and governance robustness on the performance effects of corporate social responsibility

Al‐Shammari

Banerjee

Al-Shammari

et al. 2023

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PurposeThis study aims to investigate how the association between corporate social responsibility (CSR) and firm performance, documented in prior research, is affected by the joint effects of managerial ability and attributes of the firm's governance structure.Design/methodology/approachUnbalanced panel contains the essence of cross-sectional time-series data. A significant F-test proves the inappropriateness of pooled OLS regression to the sample. Further, the rejection of the Hausman test null favors fixed-effects over random-effects. However, statistically significant results from Shapiro–Wilk test, Breusch–Pagan test and Wooldridge test reveal non-normal distribution of the dependent variable, the presence of heteroscedasticity and the existence of first-order autocorrelation, respectively. Thus, this study applies feasible generalized least squares with panel-specific autocorrelation structure (hence, a slightly smaller sample) controlling for heteroskedasticity to all models after lagging all the explanatory variables by a year.FindingsThis study finds that higher levels of managerial ability enable firms to benefit more/less from their CSR investments depending on the presence/absence of appropriate governance devices. While CEO ability may be seen as an indicator of how well the CEO might serve the firm in the market-domain strategies, the results suggest that this may not be the case in the non-market domain in the absence of appropriate governance mechanisms.Originality/valueThe arguments and analyses in this study support two important contributions to the growing literature on CSR. First, the current study is one of the few to identify CEO ability as an important factor that may influence the dynamics of the firm's CSR (see also Garcì-Sànchez et al., 2019 and Yuan et al., 2019). Second, this study examines whether governance robustness minimizes the potential for opportunistic behavior of more able CEOs or constraints the effectiveness of more able CEOs in decisions pertaining to CSR.

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CEO ability and firm performance: Stock market and job market reactions

Cited by 4 publications

References 28 publications

Strive towards investment efficiency among Egyptian companies: Do board characteristics and information asymmetry matter?

Strive towards investment efficiency among Egyptian companies: Do board characteristics and information asymmetry matter?

Does the Fit of Managerial Ability with Firm Strategy Matters on Firm Performance

The interplay of CEO ability and governance robustness on the performance effects of corporate social responsibility

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