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CEO age, shareholders’ monitoring and organic growth among European firms

Giorgio Barba Navaretti (), Davide Castellani () and Fabio Pieri
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Giorgio Barba Navaretti: Univesity of Milan

No 455, Development Working Papers from Centro Studi Luca d'Agliano, University of Milano

Abstract: We examine the relation between CEO age and firm organic growth in a large sample of mostly privately held European manufacturing firms of all size classes. Firms managed by a young CEO grow faster in terms of both sales and assets. Results are robust to the inclusion of a large vector of firm and CEO characteristics and to controls for time horizon, survival bias and endogeneity. We hypothesize that this relation is explained by an incentive of young CEOs to boost firm growth both to signal their talent in the market for managers and to get a longer stream of future compensation benefits. This may create an agency problem, due to a divergence of this corporate strategy from shareholders’ targets. In line with this hypothesis, a larger blockholder ownership, allowing for a more effective monitoring, moderates the relation between CEO age and firm growth.

Keywords: Chief Executive Officer; CEO age; organic growth; agency theory; blockholder ownership; European manufacturing firms (search for similar items in EconPapers)
JEL-codes: G32 G34 L11 L25 L60 (search for similar items in EconPapers)
Pages: 54
Date: 2019-11-12
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