TY  - JOUR
AU  - Bebchuk,Lucian A.
AU  - Cremers,Martijn
AU  - Peyer,Urs
TI  - CEO Centrality
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13701
PY  - 2007
Y2  - December 2007
UR  - http://www.nber.org/papers/w13701
L1  - http://www.nber.org/papers/w13701.pdf
N1  - Author contact info:
Lucian A. Bebchuk
Harvard Law School
1545 Massachusetts Avenue
Cambridge, MA 02138
Tel: 617/495-3138
Fax: 617/812-0554
E-Mail: bebchuk@law.harvard.edu

Martijn Cremers
Yale School of Management
135 Prospect Street
New Haven, CT 06520-8200
Tel: 203/436-0649
Fax: 203/436-0630
E-Mail: martijn.cremers@yale.edu

Urs Peyer
INSEAD - Finance
Boulevard de Constance
F-77305 Fontainebleau Cedex  FRANCE
E-Mail: urs.peyer@insead.edu
AB  - We investigate the relationship between CEO centrality -- the relative importance of the CEO within the top executive team in terms of ability, contribution, or power -- and the value and behavior of public firms. Our proxy for CEO centrality is the fraction of the top-five compensation captured by the CEO. We find that CEO centrality is negatively associated with firm value (as measured by industry-adjusted Tobin's Q). Greater CEO centrality is also correlated with (i) lower (industry-adjusted) accounting profitability, (ii) lower stock returns accompanying acquisitions announced by the firm and higher likelihood of a negative stock return accompanying such announcements, (iii) higher odds of the CEO’s receiving a “lucky” option grant at the lowest price of the month, (iv) greater tendency to reward the CEO for luck in the form of positive industry-wide shocks, (v) lower likelihood of CEO turnover controlling for performance, and (vi) lower firm-specific variability of stock returns over time. Overall, our results indicate that differences in CEO centrality are an aspect of firm management and governance that deserves the attention of researchers.
ER  -