Since the seminal work of Miller and Modigliani (1958) was conducted oncorporation finance, widespread attention from academics and practitioners hasbeen attracted by the determinants of corporate finance. A number of practicalstudies focused their attention on firm industry and market characteristics.However, most companies which are similar to each other according to these basiccharacteristics may make a significant difference in corporate success. Thishas encouraged many academics to undertake research into intra-firm managerialcharacteristics (e.g.
the age, gender, qualification, educational background ofthe companies’ senior executives, CEO), which play a vital role in thecorporation’s strategic performance ( inter alia Adams et al., 2005; Malmendierand Tate, 2005; Cronqvist et al., 2009; Betrand and Schoar, 2003). According toa common belief, corporate CEOs have their own “styles” while they are makingstrategic and tough decisions like investment and financing, therefore, theirpersonal marks are stamped on the firms they manage by them.
However, Zajac (1990) states that this literature israther controversial when it comes to the traditional efficient labour marketsas typified by Fama (1980)1. The basic idea is strongly andintuitively appealing. If a certain type of person is necessary to rise to thecorporate top levels, then CEOs ought to be homogeneous and close substitute toone another (Cronqvist et al., 2009).Nevertheless, these traditional efficiency assumptionsin the context of corporate finance decision-making (Malmendier and Tate, 2005)are questioned by little but growing literature, particularly in behavioralCorporation Finance. CEOs are really different in personal characteristics, beliefs, preferences, and managerial talents.Thus, based on these features, corporate decisions might be heterogenious andeven unreasonable (due to overconfidence)2. If these decisions havean impact on the companies’ final results, then the firm performance could beinfluenced by the characteristics of CEOs.
Following similar studies, this research plan helpsthe literature grow in this area and endeavors to evaluate the impact ofpersonal characteristics of CEOs on forecasting certain firm performance in thecase of Russian corporations. Specifically, we focus our attention on thecompanies which are listed in Russian Trade System (abbreviation, RTS). Wecreate a CEO-firm matched data table which makes it possible for us to studythe top executives across dissimilar companies of Russia since 1991.The remainder of the research paper is arranged asfollows. Theoretical and empirical background on the topic is established inSection 1 while Section 2 introduces research question, objectives andhypothesis development.
Section 3 provides the related methodology and themajor variables of interest. As for Section 4, it draws a sketch of theschedule for this paper to complete. Specifically, we apply Gantt Chart to setsufficient deadlines and accomplishment periods. Finally, Section 5 is aboutresources which are necessary to complete the research.1. LITERATURE REVIEWIn the managerial literature, there are some argumentsover whether the company managers play an important role in companyperformance. For example, Finkelstein and Hambrick (1996), Pfefer (1997)discovered that CEOs have only a little elucidatory power for effectiveness offirms.
In comparison, growing number of academics deduce that CEO heterogeneityhas an influence on firm performance (see, for example, Betrand and Schoar,2003; Adams et al., 2005). However, it should be noted that while most of thesearticles learn dissimilar CEO characteristics, they are not always in agreementwhen it comes to cases of overlap (Cronqvist, 2010).Applying variance decomposition, Betrand and Schoar(2003) discovered significant heterogeneity across executives and that this issystematically connected with distinction in corporate performance.Characterizing a number of CEO qualities (age, gender, salary, qualification,military service, educational background, tenure), they conclude the followingspecification: Yit= at+yi+Bxit+LCEO+LCFO+Lothers+Eit (1)Where, yit symbolizes one of the companystrategy variables, at represents year fixed effects, yiis presumed to be firm fixed effects, xit is a vector oftime-differing firm level controls and Eit represents an error term.The rest of the variables in equation (1) symbolizes the vector of fixed personalqualities for the company executives in many firms.
They identify that oldergenerations of executives, on average, pay more attention to financialconservation when they are making decisions, while the executives who hold MBAdegree generally have a tendency towards aggressive strategies. In a similarway, Adams et al. (2005) confirm these findings by many large-scale studies anddeduced that CEOs which had substantial control over the board of directors hada tendency to manage with fluctuating stock returns.