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Thesis
Thesis
Thesis
However, Consistent with this perspective, two recent empirical investigations link younger
CEOs with increased firm risk, attributing this phenomenon to their inclination towards adopting
riskier corporate strategies (Serfling, 2014; Peltomäki et al., 2021). And for it great influence, In
the last twenty years, numerous studies have investigated the connection between corporate
performance and CEO turnover.(see Furtado and Karan, 1990, for an extensive review).
Research on CEO age has garnered significant attention, with scholars exploring both theoretical
frameworks and empirical evidence. Younger CEOs are commonly depicted as dynamic and
energetic individuals, whereas older CEOs are often viewed as experienced yet cautious,
displaying a lesser inclination for risk-taking (Hambrick and Mason, 1984; Prendergast and
Stole, 1996; Li et al., 2017). The concept of aging, as understood in biology, signifies a natural
progression characterized by a gradual decline in various physical capabilities, including
memory, reaction time, mobility, and auditory acuity (Loderer & Waelchli, 2010). Moreover,
CEOs, influenced by social and psychological factors, may exhibit limited rationality in
decision-making, a trait that can be predicted based on their managerial background attributes
(Hambrick & Mason, 1984).
As of 2021, the Fortune 500 included 41 female CEOs compared to 459 male CEOs, reflecting a
gender disparity in top executive positions (Linder, 2023). Furthermore, statistical data indicates
a decline in the median age of CEOs in the United States, decreasing from 59 years in 1980 to 54
years in 2008 (Bhabra, 2008). Younger CEOs, upon replacing their older counterparts or vice
versa, may align the firm's risk levels more closely with their own risk inclinations (Serfling,
2014). Additionally, aging CEOs may demonstrate reduced overconfidence, resulting in
diminished involvement in acquisition activities (Yim, 2013).
Employing advanced techniques such as machine learning, researchers evaluate observable signs
of aging in CEOs' photographs (Borgschulte et al., 2021). Analysis of extensive datasets
spanning 15 years and comprising 12,000 observations suggests that female CEOs tend to be
approximately two years younger than their male counterparts, representing approximately 26%
of the standard deviation in CEO age (Withisuphakorn & Jiraporn, 2017).
Recognized across various disciplines, CEOs wield significant influence over corporate
decisions, particularly in the realm of mergers and acquisitions. CEO behavioral traits, including
overconfidence, narcissism, age, and home bias, are recognized as pivotal factors shaping these
decisions (Malmendier and Tate, 2008; Aktas et al., 2016; Yim, 2013; Chung et al., 2018; Jiang
et al., 2018). Moreover, studies within management, psychology, and sociology consistently
establish an inverse relationship between CEO age and job performance, highlighting the
detrimental impact of aging on work performance (Taylor, 1975; Verhaeghen and Salthouse,
1997; Ebner, Freund, and Baltes, 2006).
Over the past two decades, extensive research has explored the link between corporate
performance and CEO turnover, underscoring the importance of CEO succession in
organizational outcomes (Furtado and Karan, 1990). Recent empirical investigations further
support this perspective by linking younger CEOs with increased firm risk, attributing this trend
to their propensity for embracing riskier corporate strategies (Serfling, 2014; Peltomäki et al.,
2021). This convergence of evidence underscores the critical role of CEOs in shaping
organizational trajectories and underscores the importance of understanding their behavioral
dynamics in decision-making processes.
The aim of our study is to investigate the relationship between CEOs age and Firm performance.
This study seeks to answer the following research questions:
(1) Are youngers CEOs more effective and efficient than Older CEOs in Firms?
(2) How does identifying CEO age as a factor influence risk-taking behavior?
(3) How does the leadership style of a younger CEO differ from that of an older CEO
(4) what impact does it have on organizational performance?
(Skip point 4 Statement of the Problem)
Risk-Taking and Entrepreneurial Spirit: Younger CEOs tend to exhibit a greater propensity for
risk-taking and pursuing entrepreneurial endeavors, which can open up growth opportunities for
the company. Hambrick and Mason, (1984) and Li et al. (2017) have investigated the correlation
between CEO age and risk inclination, highlighting the potential advantages of younger CEOs'
readiness to take calculated risks.
Employee Engagement and Company Culture: Younger CEOs may cultivate a vibrant and
inclusive organizational culture that resonates with younger generations of employees. Research
by Simsek et al. (2005) underscores the importance of CEO leadership in shaping company
culture and fostering employee engagement.
Strategic Vision and Sustainable Growth: Despite their youth, younger CEOs can demonstrate
strategic foresight and long-term planning skills that contribute to the company's growth and
sustainability. Foss and Lyngsie (2011) highlight the role of CEO leadership in devising and
implementing strategic initiatives that propel company performance.