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CEO Decision Horizon and Firm Performance – Evidence from Chinese Listed Firms

Title:

CEO Decision Horizon and Firm Performance – Evidence from Chinese Listed Firms

Bi, Guanyu (2017) CEO Decision Horizon and Firm Performance – Evidence from Chinese Listed Firms. Masters thesis, Concordia University.

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Abstract

This study focuses on vertical agency problems (the conflicts between managers and shareholders), and analyzes the effect of top managers’ myopia action on firms’ performance in the background of China. We explore firms’ performance in three dimensions – agency costs, information risk and Tobin’s Q. We aim to expose the risk and benefit of firms to investors, when top managers occupy a stable position in a long period. Previous research on agency costs and information risk (Antia et al., 2010) reports a negative correlation between information risk and decision horizon. We examine whether these results remain consistent in the world’s second-largest economy.
We use expected CEO tenure as a proxy for the length of CEO decision horizon, and use annual sales scaled by total assets and SG&A (Selling, General and Administrative Expenses) scaled by total sales to measure agency costs. Five measures of accruals quality are used in this paper to measure information risk, which is the likelihood of the poor quality of disclosed firm-specific information. By using 2-Stage Least Squares Regression to control endogenous problem of CEO decision horizon, our empirical tests show that longer CEO decision horizon is associated with more agency costs, more information risk and higher Tobin’s Q. The results are not consistent with the previous research regarding CEO tenure and firm performance.

Divisions:Concordia University > John Molson School of Business > Finance
Item Type:Thesis (Masters)
Authors:Bi, Guanyu
Institution:Concordia University
Degree Name:M. Sc.
Program:Finance
Date:December 2017
Thesis Supervisor(s):Ullah, Saif
Keywords:CEO decision horizon, CEO tenures, information risk
ID Code:983307
Deposited By: Guanyu Bi
Deposited On:11 Jun 2018 03:50
Last Modified:01 Feb 2019 01:00

References:

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