Understanding the relationship between founder-CEOs and firm performance

Adams, Renee, Heitor, Almeida and Ferreira, Daniel (2009) Understanding the relationship between founder-CEOs and firm performance. Journal of Empirical Finance, 16 1: 136-150. doi:10.1016/j.jempfin.2008.05.002

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Author Adams, Renee
Heitor, Almeida
Ferreira, Daniel
Title Understanding the relationship between founder-CEOs and firm performance
Journal name Journal of Empirical Finance   Check publisher's open access policy
ISSN 0927-5398
Publication date 2009-01-01
Year available 2008
Sub-type Article (original research)
DOI 10.1016/j.jempfin.2008.05.002
Open Access Status DOI
Volume 16
Issue 1
Start page 136
End page 150
Total pages 15
Editor R. T. Baillie
F. C. Palm
T. J. Vermaelen
C. C. P. Wolf
Place of publication Amsterdam, The Netherlands
Publisher Elsevier BV, North-Holland
Language eng
Subject C1
140207 Financial Economics
910206 Market-Based Mechanisms
150201 Finance
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.
Keyword Founder-CEOs
CEO turnover
Instrumental variables
Family firms
Q-Index Code C1
Q-Index Status Confirmed Code
Institutional Status UQ
Additional Notes Online publication date is 31 May 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

Document type: Journal Article
Sub-type: Article (original research)
Collections: 2009 Higher Education Research Data Collection
UQ Business School Publications
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Citation counts: TR Web of Science Citation Count  Cited 108 times in Thomson Reuters Web of Science Article | Citations
Scopus Citation Count Cited 127 times in Scopus Article | Citations
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Created: Wed, 25 Mar 2009, 02:16:51 EST by Karen Morgan on behalf of UQ Business School