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CEO's age and the performance of closely held firms

Belenzon, S., Shamshur, A., Zarutskie, R. (2019) CEO's age and the performance of closely held firms. Strategic Management Journal, 40 (6). pp. 917-944. ISSN 0143-2095. (doi:10.1002/smj.3003) (KAR id:78277)

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Official URL
https://dx.doi.org/10.1002/smj.3003

Abstract

Research Summary: Using detailed ownership and financial information from a large sample of owner-managed private firms in three Western European countries, this paper examines the relationship between CEO's age and firm's performance. Tracking firms over time, we find that as a CEO ages, the firm experiences lower investment, lower sales growth, and lower profitability, but also higher probability of survival, suggesting a trade-off between the managerial approaches of younger and older CEOs. These results are stronger in industries more reliant on human capital, such as service and creative industries. Our evidence also suggests that regional financial development moderates the relationship between a CEO's age and a firm's performance by facilitating the reallocation of assets from firms owned by older CEOs to firms owned by younger CEOs. Managerial Summary: How do management styles change as CEOs grow older? Using a large firm-level dataset, we examine the behavior and performance of firms with CEOs of different ages. We find that as a CEO grows older, firm investment, growth, and profitability decline, but probability of survival increases. The results are stronger in industries where human capital and creativity are more important. Regional financial development moderates the age–performance relationship by facilitating reallocation of assets from firms with old CEOs to firms with younger CEOs. Our findings suggest that management styles change with age, as older CEOs tend to emphasize survival at the expense of higher profits and faster growth. © 2019 John Wiley & Sons, Ltd.

Item Type: Article
DOI/Identification number: 10.1002/smj.3003
Uncontrolled keywords: Finance; Large dataset; Managers; Profitability; Sales, CEO's age; closely held firms; Creative industries; European Countries; Financial development; Financial information; Firm growth; Probability of survival, Economic and social effects; cequfin
Subjects: H Social Sciences
Divisions: Divisions > Kent Business School - Division > Department of Accounting and Finance
Depositing User: Anastasiya Shamshur
Date Deposited: 08 Nov 2019 14:55 UTC
Last Modified: 07 Oct 2021 13:34 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/78277 (The current URI for this page, for reference purposes)
Shamshur, A.: https://orcid.org/0000-0002-5091-5837
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