TY - JOUR
T1 - CEO tenure and labor investment efficiency
AU - James, Hui Liang
AU - Jiraporn, Pornsit
AU - Wang, Hongxia
N1 - Publisher Copyright:
© 2025 The Author(s)
PY - 2025/8
Y1 - 2025/8
N2 - We examine the impact of CEO tenure on corporate labor investment efficiency. While some studies show that CEO entrenchment increases in tenure (e.g., Hermalin and Weisbach, 1998), others argue that managerial expertise builds over time in the office (e.g., Graf-Vlachy et al., 2020). Using a large sample of U.S. firms from 1992 to 2018, we find that longer-tenured CEOs are associated with more efficient labor investment. This finding is robust to alternative measures of labor investment inefficiency, subsample analyses, and various model specifications. Further analysis shows that longer-tenured CEOs mitigate both under- and over-investment in labor problems characterized by under-hiring and under-firing, respectively. The positive effect of CEO tenure on labor investment efficiency is stronger in human capital-intensive firms and those with greater operational uncertainty. We conclude that advanced managerial expertise enables longer-tenured CEOs to invest in labor more accurately.
AB - We examine the impact of CEO tenure on corporate labor investment efficiency. While some studies show that CEO entrenchment increases in tenure (e.g., Hermalin and Weisbach, 1998), others argue that managerial expertise builds over time in the office (e.g., Graf-Vlachy et al., 2020). Using a large sample of U.S. firms from 1992 to 2018, we find that longer-tenured CEOs are associated with more efficient labor investment. This finding is robust to alternative measures of labor investment inefficiency, subsample analyses, and various model specifications. Further analysis shows that longer-tenured CEOs mitigate both under- and over-investment in labor problems characterized by under-hiring and under-firing, respectively. The positive effect of CEO tenure on labor investment efficiency is stronger in human capital-intensive firms and those with greater operational uncertainty. We conclude that advanced managerial expertise enables longer-tenured CEOs to invest in labor more accurately.
UR - https://www.scopus.com/pages/publications/105005426334
UR - https://www.scopus.com/pages/publications/105005426334#tab=citedBy
U2 - 10.1016/j.jcae.2025.100475
DO - 10.1016/j.jcae.2025.100475
M3 - Article
AN - SCOPUS:105005426334
SN - 1815-5669
VL - 21
JO - Journal of Contemporary Accounting and Economics
JF - Journal of Contemporary Accounting and Economics
IS - 2
M1 - 100475
ER -