CEO Behavior and Firm Performance

61 Pages Posted: 21 Apr 2017

See all articles by Oriana Bandiera

Oriana Bandiera

London School of Economics & Political Science (LSE) - Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Stephen Hansen

University of Oxford - Department of Economics

Andrea Prat

Columbia Business School - Finance and Economics; Centre for Economic Policy Research (CEPR)

Raffaella Sadun

Harvard University - Strategy Unit; London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: April 2017

Abstract

We measure the behavior of 1,114 CEOs in Brazil, France, Germany, India, UK and US using a new methodology that combines (i) data on every activity the CEOs undertake during one workweek and (ii) a machine learning algorithm that projects these data onto scalar CEO behavior indices. Low values of the index are associated with plant visits, and one-on-one meetings with production or suppliers, while high values correlate with meetings with high-level C-suite executives, and several functions together, both from inside and outside the firm. We use these data to study the correlation between CEO behavior and firm performance within the framework of a firm-CEO assignment model. We show results consistent with significant firm-CEO assignment frictions, which appear to be more severe in lower-income regions. The productivity loss generated by inefficient assignment is equal to 13% of the productivity gap between high- and low-income countries in our sample.

Keywords: CEO, leadership, unsupervised learning

Suggested Citation

Bandiera, Oriana and Hansen, Stephen and Prat, Andrea and Sadun, Raffaella, CEO Behavior and Firm Performance (April 2017). CEPR Discussion Paper No. DP11960, Available at SSRN: https://ssrn.com/abstract=2954481

Oriana Bandiera (Contact Author)

London School of Economics & Political Science (LSE) - Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD) ( email )

Houghton Street
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+44 20 7955 7519 (Phone)
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Centre for Economic Policy Research (CEPR)

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IZA Institute of Labor Economics

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Stephen Hansen

University of Oxford - Department of Economics ( email )

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Andrea Prat

Columbia Business School - Finance and Economics ( email )

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United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Raffaella Sadun

Harvard University - Strategy Unit ( email )

Harvard Business School
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Boston, 02163
United States

HOME PAGE: http://people.hbs.edu/rsadun

London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP) ( email )

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United Kingdom

HOME PAGE: http://cep.lse.ac.uk/_new/staff/person.asp?id=1758

National Bureau of Economic Research (NBER) ( email )

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Centre for Economic Policy Research (CEPR) ( email )

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