Shaped by Booms and Busts

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1、ShapedbyBoomsandBusts:HowtheEconomyImpactsCEOCareersandManagementStyleAntoinetteSchoarMITSloanSchoolofManagement,NBERandideas42aschoar@mit.eduLuoZuoMITSloanSchoolofManagementluozuo@mit.eduCurrentVersion:November2011AbstractThispaperexamineshowearlycareerexperiencesaffectthecareerpatha

2、ndpromotionofmanagersaswellasthemanagerialstylethattheydevelopwhenbecomingCEOs.Weidentifytheimpactofanexogenousshocktomanagers’careers,inparticularthebusinesscycleatthecareerstartingdate.Economicconditionsatthebeginningofamanager’scareerhavelastingeffectsonthecareerpathandtheultimateou

3、tcomeasaCEO.CEOswhostartinrecessionstakelesstimetobecomeCEOs,butendupasCEOsinsmallerfirms,receivelowercompensation,andaremorelikelytorisethroughtherankswithinagivenfirmratherthanmovingacrossfirmsandindustries.Moreover,managerswhostartinrecessionshavemoreconservativemanagementstylesonce

4、theybecomeCEOs.ThesemanagersspendlessincapitalexpendituresandR&D,havelowerleverage,aremorediversifiedacrosssegments,andshowmoreconcernsaboutcosteffectiveness.WhilelookingattheroleofearlyjobchoicesonCEOcareersismoreendogenous,theresultssupporttheideathatcertaintypesofstartingpositionsar

5、efeedersforsuccessfullong-runmanagementcareers:StartinginafirmthatrankswithinthetoptenfirmsfromwhichCEOscomefromisassociatedwithfavorableoutcomesforamanager–theybecomeCEOsinlargercompaniesandreceivehighercompensation.WethankseminarparticipantsattheMITOrganizationalEconomicsLunchandthe

6、NBERCorporateFinanceMeetingsforhelpfulcomments.WealsothankRandallMorck,SendhilMullainathanandMortenSorensenforinsightfulcomments.I.IntroductionHowdoCEOsshapethestrategyandperformanceofthecompaniestheyhead?RecentpapersprovideevidencefromlargescaledatasetsthatCEOsandothertopmanagershavel

7、argeperson-specificheterogeneityintheirmanagementstylesthatarefixedovertime,seeBertrandandSchoar(2003).Theseperson-specificstylesexplainasubstantialfractionofthevariationinfirms’capitalstructures,investmentdecisionsandorganizationalstructure.TheideathatCEOsgreatlyaffecttheperformance