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The dark side effects of CEO general managerial skills on corporate overinvestment

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Abstract

Effective investment is recognized as a powerful determinant of firms’ growth and long-term advantages. However, despite long and extensive research on the upper echelons, the role of top managers’ work experiences in corporate investments remains unclear. With an investigation of the effect of CEO general managerial skills gained through lifetime work experiences on corporate overinvestment, the current study also tests boundary conditions at which this effect may be magnified or attenuated. An empirical analysis of Chinese publicly listed firms reveals that CEO general managerial skills increase corporate overinvestment: Generalist CEOs (versus specialist CEOs) are more likely to promote overinvestment. Moreover, whereas board size and economic policy uncertainty attenuate the relationship between CEO general managerial skills and corporate overinvestment, firm profitability magnifies the relationship. By examining the dark side of this managerial characteristic of CEO, this study provides important implications for literature about corporate investment and upper echelons.

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Acknowledgements

The authors acknowledge the financial support from Humanity and Social Science Fund of the Ministry of Education of China (22YJC630008) and National Natural Science Foundation Grant of China (72072052).

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Authors and Affiliations

  1. School of Economics and Management, China University of Geosciences, Wuhan, 430074, China

    Man Chen & Rui Guo

  2. College of Business, Hunan Normal University, Changsha, 410000, China

    Si Liu

  3. School of Business Administration, Hunan University, Changsha, 410082, China

    Feng Wang

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  1. Man Chen
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Correspondence to Rui Guo.

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Chen, M., Liu, S., Wang, F. et al. The dark side effects of CEO general managerial skills on corporate overinvestment. Asia Pac J Manag (2023). https://doi.org/10.1007/s10490-023-09910-8

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