Shaped by Booms and Busts: How the Economy Impacts CEO Management Style

06/05/2010 10:30 AM Wong AuditoriumAntoinette Schoar, Michael Koerner '49 Professor of Entrepreneurial FinanceDescription: Antoinette Schoar analyses how general economic conditions affect the CEO career path.
More details about the lecture coming soon.
UPDATED 2/23/2011

If you read the press or talk to practitioners, according to Antoinette Schoar, the worst thing for an entrepreneur [is] to be one who grew up in a boom time. These entrepreneurs never learn to manage finances...or build efficient firms because they're so used to having ample availability of capital that they get "spoiled."

To understand what is behind the persistent and distinctive (and different) styles of CEOs during boom and bust periods, Schoar discusses how economic trends and changes in the economy affect their careers. Her previous research had already shown that CEOs and CFOs have a significant and remarkable impact on their firms. The debate has always been about how this occurs. How can one person at the top of a huge organization, like Proctor & Gamble or IBM, change an entire firm?

Determining those differences is important understand how external forces shape a manager's style. A scarcity of a particular style_low leverage vs. high leverage, for instance_could have an impact beyond the private decision of a board hiring a CEO. It could become a public issue for the economy as well. For example, Schoar reminds the audience that many firms brought back their retired CEOs to run their companies after the tech bust of 2001. Managers, shaped by business during the 1995"2002 era, didn't have enough experience to deal with a recession.

After collecting detailed data about the career paths of CEOs from the largest 1500 publicly traded firms between 1990 and 2007, Schoar is able to show more precisely how the boom and bust cycles influenced those managers over time. Using statistical tools, she tests the effect of economic conditions at the start of the CEOs career and regresses career outcomes based on whether a manager's career began during a recession or economic growth.

About the Speaker(s): Antoinette Schoar

Michael M. Koerner (1949) Professor of Entrepreneurial Finance
MIT Sloan School of Management

An expert in corporate finance, entrepreneurship, and organizational economics, Antoinette Schoar researches venture capital, entrepreneurial finance, corporate diversification, and governance, and capital budgeting decisions in firms. She has received the Fellowship of the George Stigler Center, '97"'99, and the ERP Doctoral Scholarship of the German Ministry of Trade, '95"'97.

Schoar is the Associate Editor of the American Economic Journal in Applied Economics. She holds a degree in Economics from the University of Cologne (1995) and a Ph.D. in Economics from the University of Chicago (2000).
Host(s): Sloan School of Management, MIT Sloan School of Management


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