Which CEO Characteristics and Abilities Matter?

Kaplan, Steven N.; Klebanov, Mark M.; Sørensen, Morten

doi:10.2139/ssrn.972446

Cited by 276 publications

(317 citation statements)

References 45 publications

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“…60 . Candidates from outside the firm will have been performing 60 Kaplan, Klebanov and Sorensen (SN Kaplan et al, 2009) of these models is understandably modest (R-squared ranges from .14 to .42). The present research suggests decision-makers in these environments will overestimate this predictive ability.…”

Section: Discussionmentioning

confidence: 99%

The Loser's Curse: Decision Making and Market Efficiency in the National Football League Draft

2013

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A question of increasing interest to researchers in a variety of fields is whether the biases found in judgment and decision-making research remain present in contexts in which experienced participants face strong economic incentives. To investigate this question, we analyze the decision making of National Football League teams during their annual player draft. This is a domain in which monetary stakes are exceedingly high and the opportunities for learning are rich. It is also a domain in which multiple psychological factors suggest that teams may overvalue the chance to pick early in the draft. Using archival data on draft-day trades, player performance, and compensation, we compare the market value of draft picks with the surplus value to teams provided by the drafted players. We find that top draft picks are significantly overvalued in a manner that is inconsistent with rational expectations and efficient markets, and consistent with psychological research. Abstract A question of increasing interest to researchers in a variety of fields is whether the biases found in judgment and decision making research remain present in contexts in which experienced participants face strong economic incentives. To investigate this question, we analyze the decision making of National Football League teams during their annual player draft. This is a domain in which monetary stakes are exceedingly high and the opportunities for learning are rich. It is also a domain in which multiple psychological factors suggest teams may overvalue the chance to pick early in the draft. Using archival data on draft-day trades, player performance and compensation, we compare the market value of draft picks with the surplus value to teams provided by the drafted players. We find that top draft picks are significantly overvalued in a manner that is inconsistent with rational expectations and efficient markets and consistent with psychological research.We thank Marianne Bertrand, Jim Baron, Rodrigo Canales, Russ Fuller, Shane Frederick, Rob Gertner, Rick Larrick, Michael Lewis, Toby Moskowitz, Barry Nalebuff, Devin Pope, Olav Sorenson, David Robinson, Yuval Rottenstreich, Suzanne Shu, Jack Soll, George Wu, and workshop participants at Berkeley, Carnegie Mellon, Cornell, Duke, MIT, Penn, UCLA, UCSD, the University of Chicago and Yale, for valuable comments. We also thank Chad Reuter, Al Mannes and Wagish Bhartiya for very helpful research assistance. Comments are welcome. E-mail addresses: cade.massey@yale.edu, richard.thaler@gsb.uchicago.edu. . 2Two of the building blocks of modern neo-classical economics are rational expectations and market efficiency. Agents are assumed to make unbiased predictions about the future and markets are assumed to aggregate individual expectations into unbiased estimates of fundamental value. Tests of either of these concepts are often hindered by the lack of data. Although there are countless laboratory demonstrations of biased judgment and decision making (for recent compendiums see Thomas Gilovich et al.,...

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Section: Discussionmentioning

confidence: 99%

The Loser's Curse: Decision Making and Market Efficiency in the National Football League Draft

2013

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“…They also suggest some potential correlates with decision quality, including whether the firm is privately owned and the level of product market competition. Kaplan, Klebanov, and Sorenson (2008) show correlations between success and specific interpersonal and execution skills. Bertrand and Schoar (2003) track top managers as they move across firms and show robust evidence of heterogeneity in manager ability.…”

Section: Relating Firm and Manager Characteristics To Actions And Permentioning

confidence: 91%

“…While a growing literature documents how manager characteristics relate to outcomes (e.g., Bertrand and Schoar 2003;Kaplan, Klebanov, and Sorenson 2008), to the best of our knowledge our paper is the first to structurally examine how these characteristics correlate with firm strategies in a real-world setting. With this structure, we can gain insight into the effects of subsidies in a new industry.…”

Section: ) Introductionmentioning

confidence: 99%

Who Thinks about the Competition? Managerial Ability and Strategic Entry in US Local Telephone Markets

Goldfarb

Xiao

2008

SSRN Journal

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“…Recent papers there are findings on managerial fixed effects (Bertrand and Schoar, 2003) on managerial overconfidence proxies relating to firm behavior (Malmendier and Tate, 2005; and on Chief Executive Officer (CEO) characteristics in private equity firms being related to outcome success (Kaplan et al, 2010).…”

Section: Introductionmentioning

confidence: 99%

Does Managerial Emotional Biases Affect Debt Maturity Preference? Bayesian Network Method: Evidence from Tunisia

Ali

Jarboui

2016

Financial Risk and Management Reviews

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JEL Classification: G14, G31, G32, D80. Contribution/ OriginalityThe paper pushing organizations managers to choose according to their emotional level (applied emotional capacity test up psychometric testing). In addition, it increases the validity of inferences from the research. This paper incites governments to establish training programs aimed at the development of learning of emotional capacity.

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Which CEO Characteristics and Abilities Matter?

Cited by 276 publications

References 45 publications

The Loser's Curse: Decision Making and Market Efficiency in the National Football League Draft

The Loser's Curse: Decision Making and Market Efficiency in the National Football League Draft

Who Thinks about the Competition? Managerial Ability and Strategic Entry in US Local Telephone Markets

Does Managerial Emotional Biases Affect Debt Maturity Preference? Bayesian Network Method: Evidence from Tunisia

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