Angie Low

Career Concerns and the Busy Life of the Young CEO

We examine how real investment decisions of younger and older Chief Executive Officers (CEOs) are affected by their career concerns. Relative to their older counterparts, younger CEOs are more likely to enter new lines of business and exit from existing ones. They prefer growth through acquisitions and undertake bolder investment activities. This busier investment style of the younger CEOs appears not to hurt firm efficiency. Selection of younger CEOs by restructuring firms, omitted CEO characteristics, and tenure effects cannot explain the age-investment relation. Additional results also shed light on how CEO favouritism distorts capital allocation within firms.

Friendly Boards and Innovation

We examine how friendly boards affect firm innovation. Using CEO-director social connections as a measure of board friendliness, we find that firms with friendly boards create more patents and citations. The positive relation between friendly boards and innovation are more pronounced when firms’ advisory needs are higher or when firms operate in innovative industries. Friendly boards are also associated with higher firm value, especially when firms have higher advisory needs or when innovation is an important source of firm value. Our results support the positive view on a friendly board perspective that directors serve as valuable advisors to CEOs.