CEO management style: does educational background play a role?

Abstract

PurposeThe corporate finance literature has largely treated individual managers as uniform entities, leaving unexplained the large heterogeneity in corporate practices. The authors explore whether educational background attributes, such as a bachelor's degree from an elite institution and the field of study, influence CEO management style manifested in objectively measurable outcomes at the firm level.Design/methodology/approachThe authors construct a unique data set from various sources. The management-style variables encompass investment, financial, organizational strategy policy choices, and performance outcomes. They standardize the style variables by industry sector and express deviations from industry means into three categories (low, medium, high). The ordered logit models suggest that educational background attributes influence management style across several dimensions.FindingsThe authors document numerous statistically and economically significant results. For instance, an elite education translates to superior market performance as measured by Tobin's Q. A background in science/technology manifests in more (less) spending on R&D (advertising) and less exposure to financial risk for the firm. The authors also find that gender plays almost no role, while CEO age has a nonlinear influence role in affecting management style.Research limitations/implicationsThe study posits that educational background plays an important role along several dimensions such as skill and character development, signaling and network building. While these effects are difficult to disentangle, they all arguably influence an individual's ability to perform complex tasks such as running a company.Originality/valueThe paper contributes to the growing literature on the drivers of CEO style and performance. Previous studies have examined the role of a CEO's elite educational background on firm performance outcomes and have reported either no or limited association. In contrast, the authors document that an elite education is strongly linked to superior market performance but not to accounting-based performance measures. They also find that CEOs who major in science/technology exhibit markedly different management styles compared to their counterparts with backgrounds in business/economics or the humanities.

Do CEO's attributes increase risk-taking? Empirical evidence from France

“…Regarding financial risk-taking, specifically liquidity ratio, our results are consistent with Jaggia and Thosar (2021), CEOs with science or engineering degrees are likely to increase the liquidity ratio. In addition, CEO owner and CEO-chair undertake less risky financial decisions and enhances liquidity ratio.…”

“…They could increase the probability of accepting and introducing new changes. In the same vein, Jaggia and Thosar (2021) provide evidence that CEOs with science/technology background spend more on R&D and less exposure to financial risk for the firm.…”

Gender Diversity and Resilience in Firms During COVID-19 Pandemic

“…However, they suggest that focusing solely on the role of women might obscure the true relationship between female directors and firm performance. Jaggia and Thosar (2021) find that educational background and the age of CEO play an important role in firm performance, while gender has almost no role in affecting management style. In addition, the interpretation of the relationship between the composition of the CEO and performance must be made considering factors such as the size of the company (Shehata et al, 2017), the country (Comi et al, 2020;Jonsen et al, 2011;Nishii & Özbilgin, 2007;Zhang, 2020), the ownership (Amore et al, 2014).…”

Criteria to appraise top executives for ambidextrous leadership

“…In this paper, a criterion is, for example, a trait, an attitude, a competency or other attribute, the important thing being that it is used in the appraisal of top executives. While these different criteria are sometimes difficult to disentangle, they all have an influence on a CEO's ability to perform the complex tasks involved in running an organization (Jaggia and Thosar, 2021). The appraisal criteria are analysed here in two ways: an analysis of which criteria are relevant, and an analysis of how they should be differentiated and employed to evaluate ambidextrous leadership.…”