CEO investment cycles

Yihui Pan, Tracy YueWang, Michael S. Weisbach

Research output: Contribution to journalArticlepeer-review

28 Scopus citations

Abstract

This paper documents the existence of a CEO investment cycle, in which disinvestment decreases over a CEO's tenure, while investment increases, leading to "cyclical" firm growth in assets and employment. The estimated variation in investment rate over the CEO investment cycle is of the same order of magnitude as the differences caused by business cycles or financial constraints. Results from a number of tests generally support the view that the investment cycle is caused by agency problems, leading to increasing investment quantity and decreasing investment quality over time as the CEO gains more control over his board.

Original languageEnglish (US)
Pages (from-to)2955-2999
Number of pages45
JournalReview of Financial Studies
Volume29
Issue number11
DOIs
StatePublished - Nov 2016
Externally publishedYes

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