Since the seminal work of Miller and Modigliani (1958) was conducted on
corporation finance, widespread attention from academics and practitioners has
been attracted by the determinants of corporate finance. A number of practical
studies focused their attention on firm industry and market characteristics.
However, most companies which are similar to each other according to these basic
characteristics may make a significant difference in corporate success. This
has encouraged many academics to undertake research into intra-firm managerial
characteristics (e.g. the age, gender, qualification, educational background of
the companies’ senior executives, CEO), which play a vital role in the
corporation’s strategic performance ( inter alia Adams et al., 2005; Malmendier
and Tate, 2005; Cronqvist et al., 2009; Betrand and Schoar, 2003). According to
a common belief, corporate CEOs have their own “styles” while they are making
strategic and tough decisions like investment and financing, therefore, their
personal marks are stamped on the firms they manage by them.
However, Zajac (1990) states that this literature is
rather controversial when it comes to the traditional efficient labour markets
as typified by Fama (1980)1. The basic idea is strongly and
intuitively appealing. If a certain type of person is necessary to rise to the
corporate top levels, then CEOs ought to be homogeneous and close substitute to
one another (Cronqvist et al., 2009).
Nevertheless, these traditional efficiency assumptions
in the context of corporate finance decision-making (Malmendier and Tate, 2005)
are questioned by little but growing literature, particularly in behavioral
Corporation Finance. CEOs are really different in personal characteristics, beliefs, preferences, and managerial talents.
Thus, based on these features, corporate decisions might be heterogenious and
even unreasonable (due to overconfidence)2. If these decisions have
an impact on the companies’ final results, then the firm performance could be
influenced by the characteristics of CEOs.
Following similar studies, this research plan helps
the literature grow in this area and endeavors to evaluate the impact of
personal characteristics of CEOs on forecasting certain firm performance in the
case of Russian corporations. Specifically, we focus our attention on the
companies which are listed in Russian Trade System (abbreviation, RTS). We
create a CEO-firm matched data table which makes it possible for us to study
the top executives across dissimilar companies of Russia since 1991.
The remainder of the research paper is arranged as
follows. Theoretical and empirical background on the topic is established in
Section 1 while Section 2 introduces research question, objectives and
hypothesis development. Section 3 provides the related methodology and the
major variables of interest. As for Section 4, it draws a sketch of the
schedule for this paper to complete. Specifically, we apply Gantt Chart to set
sufficient deadlines and accomplishment periods. Finally, Section 5 is about
resources which are necessary to complete the research.
In the managerial literature, there are some arguments
over whether the company managers play an important role in company
performance. For example, Finkelstein and Hambrick (1996), Pfefer (1997)
discovered that CEOs have only a little elucidatory power for effectiveness of
firms. In comparison, growing number of academics deduce that CEO heterogeneity
has 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 these
articles learn dissimilar CEO characteristics, they are not always in agreement
when it comes to cases of overlap (Cronqvist, 2010).
Applying variance decomposition, Betrand and Schoar
(2003) discovered significant heterogeneity across executives and that this is
systematically connected with distinction in corporate performance.
Characterizing a number of CEO qualities (age, gender, salary, qualification,
military service, educational background, tenure), they conclude the following
Where, yit symbolizes one of the company
strategy variables, at represents year fixed effects, yi
is presumed to be firm fixed effects, xit is a vector of
time-differing firm level controls and Eit represents an error term.
The rest of the variables in equation (1) symbolizes the vector of fixed personal
qualities for the company executives in many firms. They identify that older
generations of executives, on average, pay more attention to financial
conservation when they are making decisions, while the executives who hold MBA
degree generally have a tendency towards aggressive strategies. In a similar
way, Adams et al. (2005) confirm these findings by many large-scale studies and
deduced that CEOs which had substantial control over the board of directors had
a tendency to manage with fluctuating stock returns.