Shaped by Booms and Busts: How the Economy Impacts CEO Careers and Management Styles

Antoinette Schoar, Luo Zuo

NBER Working Paper No. 17590
Issued in November 2011
NBER Program(s):   CF

This paper shows that economic conditions at the time managers enter the labor market have a lasting impact on their career paths as well as the managerial styles they display as CEOs. CEOs who begin their careers during recessions take less time to become CEOs, but end up at smaller firms, receive lower compensation, and rise within a given firm rather than move across firms and industries. In addition, managers who start in recessions have more conservative management styles once they become CEOs. They spend less on capital expenditures and R&D, take on lower leverage, are more diversified across segments, and show more cost effectiveness. These results do not seem to be driven by ex ante selection but are an outcome of their labor market experience. Similarly, we find that starting at a firm which is a top ten employer is associated with becoming CEO at a larger company and receiving higher compensation.

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This paper was revised on September 10, 2012

Acknowledgments

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