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CEO's age and the performance of closely held firms

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  • Sharon Belenzon
  • Anastasiya Shamshur
  • Rebecca Zarutskie

Abstract

Research Summary Using detailed ownership and financial information from a large sample of owner‐managed private firms in three Western European countries, this paper examines the relationship between CEO's age and firm's performance. Tracking firms over time, we find that as a CEO ages, the firm experiences lower investment, lower sales growth, and lower profitability, but also higher probability of survival, suggesting a trade‐off between the managerial approaches of younger and older CEOs. These results are stronger in industries more reliant on human capital, such as service and creative industries. Our evidence also suggests that regional financial development moderates the relationship between a CEO's age and a firm's performance by facilitating the reallocation of assets from firms owned by older CEOs to firms owned by younger CEOs. Managerial Summary How do management styles change as CEOs grow older? Using a large firm‐level dataset, we examine the behavior and performance of firms with CEOs of different ages. We find that as a CEO grows older, firm investment, growth, and profitability decline, but probability of survival increases. The results are stronger in industries where human capital and creativity are more important. Regional financial development moderates the age–performance relationship by facilitating reallocation of assets from firms with old CEOs to firms with younger CEOs. Our findings suggest that management styles change with age, as older CEOs tend to emphasize survival at the expense of higher profits and faster growth.

Suggested Citation

  • Sharon Belenzon & Anastasiya Shamshur & Rebecca Zarutskie, 2019. "CEO's age and the performance of closely held firms," Strategic Management Journal, Wiley Blackwell, vol. 40(6), pages 917-944, June.
    • Handle: RePEc:bla:stratm:v:40:y:2019:i:6:p:917-944
    DOI: 10.1002/smj.3003
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    Cited by:

    1. John Thornton & Chrysovalantis Vasilakis, 2024. "Do female CEOs handle crisis better? Evidence from the COVID-19 pandemic," Economics and Business Letters, Oviedo University Press, vol. 13(3), pages 158-171.
    2. Mario Daniele Amore & Morten Bennedsen & Isabelle Le Breton‐Miller & Danny Miller, 2021. "Back to the future: The effect of returning family successions on firm performance," Strategic Management Journal, Wiley Blackwell, vol. 42(8), pages 1432-1458, August.
    3. Qiuqin He & Agustín Carrilero-Castillo & Joaquin Gonzalez-Garcia, 2022. "Do CEO characteristics influence a firm’s investment in brand equity? Evidence from Chinese listed firms," International Entrepreneurship and Management Journal, Springer, vol. 18(1), pages 73-87, March.
    4. Huang, Yi-Hou & Liang, Woan-lih & Truong, Quang-Thai & Wang, Yanzhi, 2022. "No new tricks for old dogs? Old directors and innovation performance," Technological Forecasting and Social Change, Elsevier, vol. 179(C).
    5. Wang, Xin & Ma, Chaoqun & Yao, Zheng, 2024. "The double-edged sword effect of digital capability on green innovation: Evidence from Chinese listed industrial firms," Economic Analysis and Policy, Elsevier, vol. 82(C), pages 321-339.
    6. Ying Liu & Rui Wang & Jin Qin, 2021. "CEO influence on P2P platform survival: Education and experience do matter!," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(3), pages 622-634, April.
    7. Byun, Kyung-Ah (Kay) & Al-Shammari, Marwan, 2021. "When narcissistic CEOs meet power: Effects of CEO narcissism and power on the likelihood of product recalls in consumer-packaged goods," Journal of Business Research, Elsevier, vol. 128(C), pages 45-60.

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