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Understanding the relationship between founder-CEOs and firm performance

Adams, R., Almeida, H. and Ferreira, Daniel (2009) Understanding the relationship between founder-CEOs and firm performance. Journal of Empirical Finance, 16 (1). pp. 136-150. ISSN 0927-5398

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Identification Number: 10.1016/j.jempfin.2008.05.002


We use instrumental variables methods to disentangle the effect of founder–CEOs on performance from the effect of performance on founder–CEO status. Our instruments for founder–CEO status are the proportion of the firm's founders that are dead and the number of people who founded the company. We find strong evidence that founder–CEO status is endogenous in performance regressions and that good performance makes it less likely that the founder retains the CEO title. After factoring out the effect of performance on founder–CEO status, we identify a positive causal effect of founder–CEOs on firm performance that is quantitatively larger than the effect estimated through standard OLS regressions. We also find that founder–CEOs are more likely to relinquish the CEO post after periods of either unusually low or unusually high operating performances. All in all, the results in this paper are consistent with a largely positive view of founder control in large US corporations.

Item Type: Article
Official URL:
Additional Information: © 2009 Elsevier
Divisions: Finance
Subjects: H Social Sciences > HG Finance
Date Deposited: 06 Apr 2011 15:18
Last Modified: 20 Oct 2021 01:47

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