A recently published article in the Journal of Finance by Morse, Nanda, and Seru argues that if you generate a metric of CEO overreach, their stocks underperform. (...)
The researchers construct three different metrics of CEO power. One is whether he is also President or Chairman of the Board. Secondly,they uses insider ownership, the amount of stock owned by the directors. Lastly they capture the percent of the board appointed by the CEO. They use regression analysis to find that firms with high CEO power face a 4.8% decrease in firm value going forward.
It would have been nice if they put this into a long-short portfolio and showed the portfolio return characteristics. As the data covered the infamous tech bubble (1992-2003), a lot could be explained by the rather singular 2001-2 tech bubble, which while interesting, is much less interesting than if this result was more persistent across time periods.
Monday, October 24, 2011
Publicada por Miguel Madeira em 13:53