Discussion Paper Details

Please find the details for DP14839 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: The Value of Luck in the Labor Market for CEOs

Author(s): Mario Daniele Amore and Sebastian Schwenen

Publication Date: June 2020

Keyword(s): CEO Mobility, Compensation, corporate governance, firm performance and luck

Programme Area(s): Financial Economics and Industrial Organization

Abstract: It is well-known that luck increases the compensation of CEOs at their current firm. In this paper, we explore how luck affects CEOs' outside options in the labor market, and the performance of firms that hire lucky CEOs. Our results show that luck at their current firm makes CEOs move to a new firm and be appointed as both CEO and chairman. Lucky CEOs tend to match with firms subject to low analyst coverage and operating in less competitive industries. Moreover, lucky CEOs are able to obtain a higher pay at the new firm (both in absolute terms and compared to new industry peers). Finally, difference-in-differences results show that hiring lucky CEOs hurts firm performance, mostly due to a surge in operating costs and a poorer usage of corporate assets.

For full details and related downloads, please visit:

Bibliographic Reference

Amore, M and Schwenen, S. 2020. 'The Value of Luck in the Labor Market for CEOs'. London, Centre for Economic Policy Research.