Topic: Are They Different? CEOs Made in CEO Factories
Speaker: Jun Yang, Associate Professor of Finance, Kelley School of Business, Indiana University
Date: March 18th (Wed.)
Time: 2:00-3:30pm
Location: Building 4, Room 101
Language: English
Abstract:
Our research identifies a channel through which executives acquire general managerial skills which have become increasingly important in the market for CEOs in recent years. We examine the employment histories of CEOs at large US companies and find that a disproportionately large number of CEOs have work experiences at a small number of firms that are highly praised for their superior abilities in developing corporate leaders, referred to as CEO factories. Specifically, 20.2% of all CEOs appointed at the S&P 1500 firms from 1992 to 2010 came from 36 CEO factories. CEOs originated from those factory firms are referred to as factory CEOs. Appointments of factory CEOs are associated with significantly larger announcement returns than the appointments of non-factory CEOs. The abnormal announcement returns are larger for CEOs who had a longer tenure at a CEO factory and for CEOs who joined the new firm shortly after their departure from a CEO factory, suggesting that CEOs accumulated valuable human capital while working at the CEO factory. We further show that in the first three years at the new firm, factory CEOs are more likely than non-factory CEOs to discontinue large and underperforming segments, improve the performance of remaining segments, and invest heavily in R&D for sustainable growth. Firms hiring factory CEOs exhibit better performance in the long run and award those CEOs with greater compensation.
About the speaker:
Jun Yang is Associate Professor of Finance at Kelley School of Business at Indiana University. Professor Yang received a Ph.D. in Operation Management from The Chinese University of Hong Kong in 1997, and a Ph.D. in Finance from Washington University in Saint Louis in 2005. Professor Yang's research focuses on financial contracting, corporate finance, corporate governance, executive compensation. Her papers have published in the Journal of Financial Economics, the Review of Financial Studies and other leading finance journals.
