Managerial ability, CEO age and the moderating effect of firm characteristics

Recent surveys indicate that America's chief executive officers (CEOs) are getting older. While aging is often associated with greater experience, improved skill sets and higher job performance, prior research warns that aging can also lead to a significant decrease in cognitive function, energy, ambition and, consequently, the ability of CEOs to manage their firms. We examine this issue and find that older CEOs display significantly lower managerial ability as compared to younger CEOs. Exploring differences in firm factors, we further find that older CEOs exhibit significantly lower managerial ability when managing high‐technology firms and significantly higher managerial ability when managing more mature, highly regulated firms. Collectively, our study provides new evidence that while managerial ability decreases with age, firm characteristics significantly moderate this relationship.