The False Twinkling of Superstar CEOs


Inevitably, some researchers fixate on celebrities, neither using nor even acknowledging the power of modern bloodcomposition, finger-length, and genetics analysis tools.
“Superstar CEOs,” Ulrike Malmendier and Geoffrey Tate, SSRN paper #972725, March 15, 2007.

The authors, at University of California Berkeley and at University of California Los Angeles, respectively, explain:

“We analyze the impact of winning high-profile tournaments on the subsequent behavior of the tournament winner in the context of chief executive officers of U.S. corporations. We find that the firms of CEOs who achieve “superstar” status via prestigious nationwide awards from the business press subsequently underperform beyond mere mean reversion, both relative to the overall market and relative to a sample of “hypothetical award winners” with matching firm and CEO characteristics. At the same time, award-winning CEOs extract significantly more compensation from their company following the award, both in absolute amounts and relative to other top executives in their firm.”

(That’s an excerpt from the article “Financial Meltdown,” Published in AIR 15:3.)