Date of Graduation

7-2021

Document Type

Dissertation

Degree Name

Doctor of Philosophy in Business Administration (PhD)

Degree Level

Graduate

Department

Finance

Advisor

Tomas Jandik

Committee Member

Scott Hsu

Second Committee Member

Timothy J. Yeager

Keywords

CEO experience, innovation, managerial ability, private equity, professional experience, social network connection, supply chain, valuation information

Abstract

In my dissertation, I explore how managerial attributes affect corporate policies.

In my first essay, I examine the effects of public firm CEOs’ prior private equity (PE) target experiences on corporate policies. Based on difference-in-differences and propensity score matching analyses, public firm CEOs previously serving as CEOs in PE targets reduce investment by about 15 percent while enhancing patent values by over 7 percent after taking office compared to CEOs without such experiences. The effects are stronger if these CEOs (1) worked in targets invested by more reputable PE firms, (2) worked in targets invested by PE firms known for implementing significant capital investment cuts or for enhancing innovation, and (3) have more recent and longer PE target experiences. These CEOs also cut employment, enhance firm value, and increase leverage.

In my second essay, I examine whether and how the managerial ability of customer firms affects their suppliers. Following the event where a more able CEO takes office in the customer firm, the percentile rank of supplier’s managerial ability increases by 12, while the percentile rank of supplier’s total firm efficiency (i.e., the ability to generate sales from a given set of inputs) increases by 10. The effects are stronger if (1) the supplier is financially constrained, (2) the supplier is in the industry that is more vertically related with its customer industry, (3) the supplier is in the industry that shares similar technology space with its customer industry, (4) the customer firm CEOs are hired from within the same industry, (5) the supplier is more important to its customer in term of the proportion of the customer’s cost of goods sold (COGS) accounted for by the supplier, (6) the customer-supplier relationship lasts longer, and (7) the managers in the supplier firms were previously socially connected with managers in the customer firms. Furthermore, the supplier firm improves earnings quality, boosts credit ratings, increases leverage,and enhances firm value after more-able customer CEOs take office. Overall, these findings provide evidence of positive spillover effects of managerial ability in the supply chain.

In my third essay, I study the effects of the social network connections of chief technology officers (CTOs) on corporate innovation. I find that firms with better connected CTOs invest more in research and development (R&D), receive more patents, and attract more patent citations. In addition to the general network centrality, the professional network centrality of CTOs constructed based on the sample of CTOs also fosters firm innovation. Further tests show that firms innovate more if the CTOs are hired by the incumbent CEOs. Finally, I provide evidence indicating that well-connected CTOs engage in efficient R&D investments.

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