CEO characteristics and firm valuation: a quantile regression analysis
This study investigates the effects of three highly-visible CEO characteristics on firm valuation. Using a sample of 2702 observations for Australian firms over the period 2001–2011, we find that CEO age is uniformly associated with lower firm valuation. CEO tenure is also associated with lower valuation, but more significantly so in the higher quantiles of firm valuation, that is for firms with high-growth opportunities. In contrast, CEO duality is found to be beneficial only for firms with high-growth opportunities. Overall, the study highlights the contingent relationship between CEO characteristics and firm valuation.
KeywordsCEO characteristics Age Tenure Duality Performance Quantile regression
We would like to express our deepest gratitude to two anonymous reviewers for their many helpful comments.
- Donaldson, L. (1990). The ethereal hand: Organizational economics and management theory. Academy of Management Review, 15(3), 369–381.Google Scholar
- Eisenhardt, K. M. (1989). Agency theory: An assessment and review. Academy of Management Review, 14(1), 57–74.Google Scholar
- Finkelstein, S., & Hambrick, D. C. (1996). Strategic leadership: Top executives and their effects on organizations. Nashville, TN: South-Western Publishing.Google Scholar
- Finkelstein, S., Hambrick, D. C., & Cannella, A. A. (2009). Strategic leadership: Theory and research on executives, top management teams, and boards. Oxford: Oxford University Press.Google Scholar
- Forbes, D. P., & Milliken, F. J. (1999). Cognition and corporate governance: Understanding boards of directors as strategic decision-making groups. Academy of Management Review, 24(3), 489–505.Google Scholar
- Hambrick, D. C., & Mason, P. A. (1984). Upper echelons: The organization as a reflection of its top managers. Academy of Management Review, 9(2), 193–206.Google Scholar
- Jensen, M. C. (1986). Agency cost of free cash flow, corporate finance, and takeovers. American Economic Review, 76(2), 323–329.Google Scholar