Please use this identifier to cite or link to this item: http://hdl.handle.net/10125/64801

How Do CEOs Make Investment Decisions in Their Early Years of Tenure? Evidence from Investment Efficiency

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dc.contributor.author Huiqi Gan
dc.date.accessioned 2019-12-06T18:28:26Z
dc.date.available 2019-12-06T18:28:26Z
dc.date.issued 2019-08-03
dc.identifier.uri http://hdl.handle.net/10125/64801
dc.description.abstract Career concerns are escalated during the early years of a CEO’s tenure because the market is uncertainty about the new CEO’s ability and the compatibility between his or her skills and the firm’s strategic needs. This study examines whether such increased career concerns induce investment inefficiency during the early years of a CEO’s tenure. I find that underinvestment is more likely to happen in the early years than in the later years, and that the underinvestment problem is most evident when the CEO is externally appointed, holds an interim position, and has low managerial ability, and when the firm has a higher level of information asymmetry and lower financial reporting quality. I also find that firms are less likely to issue debts during those early years, which suggests that a reduced supply of capital can contribute to the underinvestment phenomenon in the early years of a CEO’s tenure. Together, these findings indicate that during the early years of a CEO’s service, especially in contexts where career concerns are high and the information environment is more asymmetric, investment inefficiency is more likely to occur.
dc.subject Investment efficiency
dc.subject Underinvestment
dc.subject CEO tenure
dc.subject CEO turnover
dc.subject Career concerns
dc.subject Information asymmetry
dc.title How Do CEOs Make Investment Decisions in Their Early Years of Tenure? Evidence from Investment Efficiency
Appears in Collections: 17 Management Accounting: Executive Compensation/Corporate Governance


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