THE IMPACT OF CEO AGE ON FIRM PERFORMANCE BY SECTOR

Abstract

This research paper explores how the age of a firm's CEO relates to the firm's performance by industrial sector. Prior research examining CEO age and firm performance does not consider if the relationship varies by industrial sector. A dataset containing financial, firm, and CEO data for all S&P500 firms from 1995-2020 is used to analyze this relationship within each sector. A direct relationship between CEO age and ROE is discovered within two NAICS sectors. Older CEOs perform better in the Administrative and Support and Waste Management and Remediation Services sector, while younger CEOs perform better in the Health Care and Social Assistance sector. Analysis also shows that average CEO age varies by sector, with Arts, Entertainment, and Recreation CEOs being the youngest while Mining, Quarrying, and Oil and Gas Extraction CEOs are the oldest. Furthermore, firms managed by younger CEOs are more volatile and riskier in the population as a whole, and within the following sectors: Manufacturing, Administrative and Support and Waste Management and Remediation Services, Finance and Insurance, Information, and Retail Trade. Lastly, firms managed by older CEOs are more likely to hold treasury stock and give dividends. The examining of individual sectors in this paper provides a more detailed understanding of how CEO age is associated with firm performance.