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Abstract:

Journal Article
CEO Behavior and Firm Performance
Oriana Bandiera, Stephen Hansen, Andrea Prat and Raffaella Sadun
July 2019
Paper No' :


Tags: ceos; ceo behavior; productivity;

We measure the behavior of over 1,100 CEOs in six countries (Brazil, France, Germany, India, UK and US) using a new methodology that combines (i) a survey measuring each activity undertaken in a random work-week by the executives and (ii) a machine learning algorithm that projects these high dimensional data onto one CEO behavior index. A simple firm-CEO matching model yields the null hy-pothesis that, in absence of matching frictions, CEO behavior is uncorrelated with firm performance. Combining the CEO behavior index with firm level accounting data we reject this null. We find a large and significant correlation between CEO behavior and firm performance, which appears only gradually over time after the CEO is appointed and is stronger in emerging economies. Our results suggest that CEO-firm matching frictions may account for a sizable fraction of the cross country productivity differential observed in the data.