CEO Career Concerns And Variability Of Corporate Performance

It has been the focus of related research that CEO characteristics significantly affect corporate decision-making and corporate performance.However,the subject still needs to be explored from the following aspects.On the one hand,most of the extant research focuses on the level of firm performance,but the volatility of firm performance,which is an important aspect of corporate performance evaluation,has been neglected to some extent.On the other hand,CEO career concern is an important dimension of CEO characteristics and there have been abundant studies abroad that demonstrate significant influence of CEO career concerns on firm decision-making.Nevertheless,related research is still insufficient in the background of China.Based on existing literature,we predict that CEO career concerns could affect corporate performance variability.But there is no empirical evidence that directly demonstrate the relation between them.Thus,we attempt to expand the literature in this field through our empirical research on whether and how CEO career concerns affect volatility of corporate performance.Using the data of Chinese listed companies from 1999 to 2014,this paper empirically investigates whether CEO career concerns affect variability of corporate performance.We employ CEO age and appointment of new CEO as proxies for CEO career concerns and construct proxies for corporate performance variability using three different methods.The results indicate a significantly positive association between CEO career concerns and firm performance variability.Specifically,younger or newly appointed CEOs are associated with more volatile corporate performance.Further research reveals that state-controlling weakens the effect of CEO career concerns on corporate performance variability to some extent.Furthermore,we find that CEO career concerns are positively associated with the variability of acquisition and restructuring activities,leverage ratios,accrual earnings management,the frequency of acquisition and restructuring activities,the level of leverage ratios and accrual earnings management,which will contribute to greater performance variability.We first empirically study whether and how CEO career concerns affect-corporate performance variability,and our research expands the literature on the influence of CEO characteristics on firm decision-making and firm performance.We identify CEO career concern as a factor that prominently affects the volatility of corporate performance and we provide empirical evidence on the theory of career concerns in the background of transition economy.Additional,since that CEO career concerns could contribute to decision-making biases,we provide boards of listed companies with some suggestions about the promotion of corporate governance mechanism.