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Firm Performance (2003)
| Citations: | 1 - 0 self |
BibTeX
@MISC{Adams03firmperformance,
author = {Renée B. Adams and Heitor Almeida and Daniel Ferreira and Renée B. Adams and Heitor Almeida and Daniel Ferreira},
title = {Firm Performance},
year = {2003}
}
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Abstract
While previous empirical literature has examined the effect of founder-CEOs on Þrm performance, it has largely ignored the effect of Þrm performance on founder-CEO status. In this paper, we use instrumental variables methods to better understand the relationship between founder-CEOs and performance. Using the proportion of the Þrm’s founders that are dead and the number of people who founded the company as instruments for founder-CEO status, we Þnd strong evidence that founder-CEO status is endogenous in performance regressions. This implies that the direct effect of founder-CEOs on Þrm performance cannot be estimated correctly without accounting for the endogeneity of founder-CEO status. Perhaps surprisingly, we Þnd that performance is negatively related to the likelihood that founders retain the CEO title. This result appears to be driven primarily by founder departures after periods of good performance, rather than by an entrenchment effectthatallowsfoundersto remain as CEOs following poor performance. After factoring out the effect of performance on founder-CEO status, we Þnd a residual positive correlation between founder-CEO status and Þrm performance. This Þnding suggests that there is a positive causal link from founder-CEOs to Þrm performance.
Keyphrases
founder-ceo status firm performance rm performance instrumental variable method direct effect positive causal link founder departure rm performance cannot poor performance residual positive correlation rm founder entrenchment effectthatallowsfoundersto previous empirical literature ceo title strong evidence good performance performance regression
