Founder-CEOs, Investment Decisions, and Stock Market Performance

Working Paper Series from Ohio State University, Charles A. Dice Center for Research in Financial Economics

Abstract: Eleven percent of the largest public U.S. firms are headed by the CEO who founded the firm. Founder-CEO firms differ systematically from successor-CEO firms. Founder-CEO firms invest more in R&D, have higher capital expenditures, and make more focused mergers and acquisitions. They have a higher firm valuation. More-over, an equal-weighted investment strategy that had invested in founder-CEO firms from 1993{2002 would have earned a benchmark-adjusted return of 8.3% annually. A value-weighted investment strategy would have earned an abnormal return of 10.7%. The excess return is robust; after controlling for a wide variety of firm characteristics, CEO characteristics, and industry affiliation, the abnormal return is still 4.4% annually.

JEL-codes: G32 (search for similar items in EconPapers)
Date: 2006-09
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Citations: View citations in EconPapers (3)

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Journal Article: Founder-CEOs, Investment Decisions, and Stock Market Performance (2009)
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