CEO Ability, Pay, and Firm Performance

Gilles Hilary, Y. Y. Chang and Sudipto Dasgupta
Additional contact information
Y. Y. Chang: School of Economics and Finance
Sudipto Dasgupta: HKUST - Hong Kong University of Science and Technology

Post-Print from HAL

Abstract: Do chief executive officers (CEOs) really matter? Do cross-sectional differences in firm performance and CEO pay reflect differences in CEO ability? Examining CEO departures over 1992-2002, we first find that the stock price reaction upon departure is negatively related to the firm's prior performance and to the CEO's prior pay. Second, the CEO's subsequent labor market success is greater if the firm's predeparture performance is better, the prior pay is higher, and the stock market's reaction is more negative. Finally, better prior performance, higher prior pay, and a more negative stock market reaction are associated with worse postdeparture firm performance. Collectively, these results reject the view that differences in firm performance stem entirely from non-CEO factors such as the firms' assets, other employees, or "luck," and that CEO pay is unrelated to the CEO's contribution to firm value.

Keywords: CEO ability; CEO pay; managerial labor market; firm performance (search for similar items in EconPapers)
Date: 2010-10
References: Add references at CitEc
Citations: View citations in EconPapers (68)

Published in Management Science, 2010, 56 (10), pp.1633-1652. ⟨10.1287/mnsc.1100.1205⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: CEO Ability, Pay, and Firm Performance (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00585950

DOI: 10.1287/mnsc.1100.1205

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().