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CEO-Firm Matches: Evidence from Competition Shocks

Darvishan, Majid (2020) CEO-Firm Matches: Evidence from Competition Shocks. Doctoral Dissertation, University of Pittsburgh. (Unpublished)

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Abstract

Competition shocks fundamentally alter the nature of a firm's strategy; an increase (decrease) in competition shifts firms’ focus from long-term growth (short-term performance) to short-term performance (long-term growth). Using major decreases and increases of import tariffs as quasi-natural experiments, this paper documents a non-monotonic relationship between competition and the probability of CEO turnover. Based on CEOs’ prior experience, I construct two indices of skills: 1) skills that are suitable for high-competition and short-term performance, and 2) skills that are desirable for low-competition and long-term growth. I find that firms are more likely to retain a CEO or appoint a candidate with high-competition (low-competition) skills following a tariff cut (increase). Using family firms as instruments for the quality of CEO-firm matches, I find that firms run by CEOs with relevant skills outperform those run by CEOs who lack those skills. Because turnovers are costly, firms change their CEOs if the benefits of a CEO with relevant skills outweigh the costs. I examine whether firms that retain their CEOs alternatively change their compensation plan to motivate CEOs to deliver appropriate strategies. I find that financial conditions and CEO power prevent firms from implementing compensation schemes that promote optimal strategies following competition shocks.


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Details

Item Type: University of Pittsburgh ETD
Status: Unpublished
Creators/Authors:
CreatorsEmailPitt UsernameORCID
Darvishan, MajidMajid.darvishan@gmail.commad239
ETD Committee:
TitleMemberEmail AddressPitt UsernameORCID
Committee ChairDenis, Dianedkdenis@pitt.edu
Committee MemberDenis, Daviddjdenis@pitt.edu
Committee MemberThomas, Shawnshthomas@katz.pitt.edu
Committee MemberKoch, Andrewawkoch@pitt.edu
Committee MemberWalker, Markmdwalker@ncsu.edu
Date: 9 July 2020
Date Type: Publication
Defense Date: 4 June 2020
Approval Date: 9 July 2020
Submission Date: 8 June 2020
Access Restriction: 2 year -- Restrict access to University of Pittsburgh for a period of 2 years.
Number of Pages: 124
Institution: University of Pittsburgh
Schools and Programs: Joseph M. Katz Graduate School of Business > Business Administration
Degree: PhD - Doctor of Philosophy
Thesis Type: Doctoral Dissertation
Refereed: Yes
Uncontrolled Keywords: CEO-Firm Match, CEO Turnover, CEO Compensation
Date Deposited: 09 Jul 2020 23:09
Last Modified: 09 Jul 2020 23:09
URI: http://d-scholarship.pitt.edu/id/eprint/39211

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