Managers with and without Style: Evidence Using Exogenous Variation

In a large panel of Compustat firms, we find that firm policy changes after exogenous CEO departures do not display abnormally high levels of variability, casting doubt on the presence of idiosyncratic-style effects in policy choices. After endogenous CEO departures, we do detect abnormally large po...

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Bibliographic Details
Published in:The Review of financial studies 2013-03, Vol.26 (3), p.567-601
Main Authors: Fee, C. Edward, Hadlock, Charles J., Pierce, Joshua R.
Format: Article
Language:English
Subjects:
Business management
Business structures
Changes
Chief executive officers
Empirical evidence
Employment policies
Financial investments
Financial management
Financial performance
Investment management companies
Investment strategies
Management policies
P values
Studies
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Summary:In a large panel of Compustat firms, we find that firm policy changes after exogenous CEO departures do not display abnormally high levels of variability, casting doubt on the presence of idiosyncratic-style effects in policy choices. After endogenous CEO departures, we do detect abnormally large policy changes. These changes are larger when the firm is likely to draw from a deeper pool of replacement CEO candidates, suggesting the presence of causal-style effects that are anticipated by the board. Our evidence suggests that managerial styles are not transferred across employers and that standard F-tests are inappropriate for identifying style effects.
ISSN:0893-9454
1465-7368
DOI:10.1093/rfs/hhs131