İşletme Fakültesi Seminer Serisi / Majid Darvishan

Date: Friday, Feb 7th, 2020

Time:13:30-15:00

Location: AB2, Meeting Room 345

Title: CEO-Firm Matches: Evidence from Competition Shocks

Abstract: Competition shocks fundamentally alter the nature of a firm's strategy; an increase (decrease) in competition shifts firms' focus from long-term growth (short-term performance) to short-term performance (long-term growth). Using major decreases and increases of import tariffs as quasi-natural experiments, this paper documents a non-monotonic relationship between competition and the probability of CEO turnover. Based on CEOs' prior experience, I construct two indices of skills: 1) skills that are suitable for short-term performance, and 2) skills that are desirable for long-term growth. I find that firms are more likely to retain a CEO or appoint a candidate with short-term (long-term) skills following a tariff cut (increase). Firms run by CEOs with relevant skills outperform those run by a CEO who lacks those skills. Because turnovers are costly, firms change their CEOs if the benefits of a CEO with relevant skills outweigh the costs. Firms that retain their CEOs change their compensation plan to motivate CEOs to deliver appropriate strategies.