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Understanding the relationship between founder-CEOs and firm performance
Adams, R., Heitor, A. and Ferreira, D. (2008-07-10) Understanding the relationship between founder-CEOs and firm performance. Journal of Empirical Finance, 16 1: 136-150.
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| Author(s) |
Adams, R.
Heitor, A.
Ferreira, D.
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| Title |
Understanding the relationship between founder-CEOs and firm performance
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| Journal name |
Journal of Empirical Finance
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| Publication date |
2008-07-10
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| Year available |
2008
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| Volume number |
16
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| Issue number |
1
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| ISSN |
0927-5398
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| Start page |
136
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| End page |
150
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| Total pages |
15
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| Editor(s) |
Wolf, C. C. P.
Palm, F. C.
Baillie, R. T.
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| Place of publication |
Amsterdam, The Netherlands
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| Publisher |
Elsevier BV, North-Holland
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| Collection year |
2009
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| Language |
en
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| Subject |
C1
140207 Financial Economics
910206 Market-Based Mechanisms
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| Abstract |
We use instrumental variables methods to disentangle the effect of founder–CEOs on performance from the effect of performance on founder–CEO status. Our instruments for founder–CEO status are the proportion of the firm's founders that are dead and the number of people who founded the company. We find strong evidence that founder–CEO status is endogenous in performance regressions and that good performance makes it less likely that the founder retains the CEO title. After factoring out the effect of performance on founder–CEO status, we identify a positive causal effect of founder–CEOs on firm performance that is quantitatively larger than the effect estimated through standard OLS regressions. We also find that founder–CEOs are more likely to relinquish the CEO post after periods of either unusually low or unusually high operating performances. All in all, the results in this paper are consistent with a largely positive view of founder control in large US corporations.
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| Keyword(s) |
Founder-CEOs
CEO turnover
Instrumental variables
Family firms
Endogeneity
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| Additional Notes |
Online publication date is 10 July 2008 but Jnl pubication date is 2009. Renée Adams a, Heitor Almeida b, Daniel Ferreira c a University of Queensland, Australia and ECGI, Belgium b University of Illinois, United States and NBER, United States c London School of Economics, United Kingdom, CEPR, United Kingdom and ECGI, Belgium Available online 10 July 2008 but
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