CEO busyness and firm performance: evidence from Indonesia

Iman Harymawan; Mohammad Nasih; Melinda Cahyaning Ratri; John Nowland

doi:10.1016/j.heliyon.2019.e01601

CEO busyness and firm performance: evidence from Indonesia

Iman Harymawan, Mohammad Nasih, Melinda Cahyaning Ratri, John Nowland

Research output: Contribution to journal › Article › peer-review

38 Citations (Scopus)

Abstract

This study investigates whether busy CEOs are associated with lower firm performance, and if this relationship is moderated by firm growth, CEO tenure and corporate governance practices in Indonesia. This study uses 876 firms-year observations from 268 firms listed on the Indonesia Stock Exchange (IDX)for the period spanning 2014 to 2017. We find that busy CEOs are associated with lower firm performance. This negative relationship is stronger in firms with high growth and when busy CEOs have shorter tenure. We also show that corporate governance practices have no impact on the negative relationship between CEO busyness and firm performance. For firms and shareholders, our findings indicate that it is not a good idea for CEOs to hold two or more outside directorships, particularly in the early years of taking up their CEO position. Our results suggest that restrictions on CEO busyness would be beneficial to shareholders.

Original language	English
Article number	e01601
Journal	Heliyon
Volume	5
Issue number	5
DOIs	https://doi.org/10.1016/j.heliyon.2019.e01601
Publication status	Published - May 2019

Keywords

Business
Economics

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title = "CEO busyness and firm performance: evidence from Indonesia",

abstract = "This study investigates whether busy CEOs are associated with lower firm performance, and if this relationship is moderated by firm growth, CEO tenure and corporate governance practices in Indonesia. This study uses 876 firms-year observations from 268 firms listed on the Indonesia Stock Exchange (IDX)for the period spanning 2014 to 2017. We find that busy CEOs are associated with lower firm performance. This negative relationship is stronger in firms with high growth and when busy CEOs have shorter tenure. We also show that corporate governance practices have no impact on the negative relationship between CEO busyness and firm performance. For firms and shareholders, our findings indicate that it is not a good idea for CEOs to hold two or more outside directorships, particularly in the early years of taking up their CEO position. Our results suggest that restrictions on CEO busyness would be beneficial to shareholders.",

keywords = "Business, Economics",

author = "Iman Harymawan and Mohammad Nasih and Ratri, {Melinda Cahyaning} and John Nowland",

note = "Funding Information: This work was supported by the Universitas Airlangga, Indonesia under Riset Mandat scheme 2018. Publisher Copyright: {\textcopyright} 2019 The Authors",

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AU - Harymawan, Iman

AU - Nasih, Mohammad

AU - Ratri, Melinda Cahyaning

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AB - This study investigates whether busy CEOs are associated with lower firm performance, and if this relationship is moderated by firm growth, CEO tenure and corporate governance practices in Indonesia. This study uses 876 firms-year observations from 268 firms listed on the Indonesia Stock Exchange (IDX)for the period spanning 2014 to 2017. We find that busy CEOs are associated with lower firm performance. This negative relationship is stronger in firms with high growth and when busy CEOs have shorter tenure. We also show that corporate governance practices have no impact on the negative relationship between CEO busyness and firm performance. For firms and shareholders, our findings indicate that it is not a good idea for CEOs to hold two or more outside directorships, particularly in the early years of taking up their CEO position. Our results suggest that restrictions on CEO busyness would be beneficial to shareholders.

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CEO busyness and firm performance: evidence from Indonesia

Abstract

Keywords

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