Managers with and without Style: Evidence Using Exogenous Variation

Abstract

We study managerial style effects in a large panel of Compustat firms from 1990 to 2007. We find that policy changes after exogenous CEO departures do not display abnormally high levels of variability, casting doubt on the hypothesis that unanticipated idiosyncratic managerial style effects have a substantive impact on corporate policies. For endogenous CEO departures, we detect abnormally large policy changes after forced CEO turnover. These changes are larger in firms that are likely to draw from a deeper pool of replacement CEO candidates based on the firm's geographic location. This evidence is consistent with the presence of casual style effects that are fully anticipated by the board when choosing a new leader. In contrast to prior work, managers in our sample do not appear to adopt a common relative-to-firm style bias across multiple employers. We also offer cautionary evidence on the use of standard F-tests to detect style effects.

Extraordinary Acquirers

“…Recently, Fee, Hadlock, and Pierce (2013) criticize the use of standard F-test procedures in establishing the joint significance of the estimated fixed effects. Replicating the analysis of Bertrand and Schoar (2003), they show that after scrambling the data and randomly assigning CEOs to firms-thereby destroying any CEO effect in the data-the standard F-tests and the associated p-values are hardly affected.…”

Extraordinary acquirers

“…More recently,Fee, Hadlock, and Pierce (2013) question whether the manager-specific effects can be interpreted as causal, and also raise a A.Golubov et al / Journal of Financial Economics 116 (2015) 314-330 …”

Financial regulation in geographically-segmented executive labor markets: Evidence from TARP

“…Yonker (2012) reports that firms hire locally five times more often than would be expected if geography were irrelevant to the matching process. Fee, Hadlock, and Pierce (2013) find that local labor market conditions appear to matter for CEO succession. Bouwman (2012) finds that CEO salary changes are positively correlated with salary changes of CEOs of firms that are geographically close.…”