Do we overestimate the impact of CEOs on company performance?
A new study says CEOs explain 2% of variability in stock returns, while global, country and industry changes account for 11%, 4% and 1%.
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Do CEOs really affect company performance? Many would argue that they don’t, and that companies would get along just fine without the intervention of a high-flying, exhorbitantly paid chief executives.
New research suggests that those who believe their CEOs are making little difference—or even leaving a trail of wreckage behind them—may be right. In fact, the study concludes that a CEO’s impact on a company may be less than external factors such as effects from global and local economies and changes to an industry.
The writers, Arturo Bris of Yale University, and Maryam Zargari of the IMD World Competitiveness Centre, in a paper
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