The ‘CEO’ Effect on the Performance of Brazilian Companies: An Empirical Study Using Measurable Characteristics

• Date: 01 September 2016
• Published date: 01 September 2016
• DOI: http://doi.org/10.1111/emre.12079
• Author: Manuel Portugal Ferreira,Guilherme Três,Fernando Ribeiro Serra

The ‘CEO’Effect on the Performance of

Brazilian Companies: An Empirical Study

Using Measurable Characteristics

FERNANDO RIBEIRO SERRA,GUILHERME TRÊS and MANUEL PORTUGAL FERREIRA

1

Programa de Pós-Graduação em Administração, UNINOVE –UniversidadeNove de Julho, São Paulo, Brazil

The experience and competence of CEOs may have a positive influence on the performance of firms. Using

secondary data on the performance of 73 Brazilian listed companies and primary data collected through a survey

of the social and demographic characteristics of CEOs we tested a set of hypotheses concerning the influence of

CEOs on the performance of the firms they headed between 1997 and 2012. Specifically, we examined the

relationships between CEOs’experience and competence regarding common accounting indicators. The results

indicatethat CEOs with diverse experiencewould not do better in dynamic environments, and that specificexperience

has a negative effect on performance. Furthermore, CEOs with formal education do not show better short-term

performance, and tenure has an inverted U-shaped relationship with the firm’s performance. This article helps to

provide a betterunderstanding of the behavior of Brazilian CEOs by examining their characteristics.

Keywords: top management team; chief executive officer; performance; strategy

Introduction

The CEOs and other top executives of Brazilian

companies are idolized for their performance and envied

for their income.In Brazil, there is a widespreadbelief that

CEOs are a key factor when it comes to organizational

performance. CEOs such as the former president of Vale,

Roger Agnelli, and another eight Brazilian executives are

considered responsible for the excellent performance of

their companies (Hansen et al., 2013). Nevertheless, in

Brazil we know little regarding this fundamental

organizational resource (Hoskisson et al., 1999; Serra

and Ferreira, 2010). Internationally, research on the

impact of CEOs and the top management team (TMT)

has grown and featured in a number of business studies,

such as the work of Hambrick and Mason (1984),

concerning the role of the TMT in the formulation and

implementation of fundamental strategies for companies

to succeed. The degree of performance attributed to the

CEO influence is called the ‘CEO effect’(Quigley and

Hambrick, 2015).

The role of the CEO is sometimes oversized and

dominant in the company. A CEO, therefore, cannot be

considered only a member of the top management team

(TMT). The characteristics of the CEO (and relatedteams

such as TMTs and boards) may influence companies’

performance (Hambrick and Mason, 1984). Since the

work of Hambrick and Mason (1984), a growing amount

of studies have used different CEO characteristics in an

attempt to explain different possibilities of effects

(Wiersema and Bantel, 1992; Hambrick et al., 1996;

Barker and Mueller, 2002; Hsu and Huang, 2011).

Associate CEOs (and related teams, as TMTs, and

boards) to firm performance is widely studied (Bergh

et al., 2016), howeverthe works show inconsistent results.

We associate it to the complexity and difference in

contexts, but recognizing that the ‘CEO matters’in

different extent and situations (Crossland and Hambrick,

2007). Olie et al. (2012) suggested the need to observe

the context, noting that it is of vital importance to

understand the effect that leaders have on their respective

environments. In other words, the actions of a CEO can

vary depending on the national context in which a

company operates (Elbanna, 2012). In different countries

the CEO characteristics may have different influences in

companies’performance (Crossland and Hambrick,

2007). It is also important to consider to what extent it is

Correspondence: Fernando Ribeiro Serra, UNINOVE –Universidade

Nove de Julho, Programa de Pós-Graduação em Administração, Av.

Francisco Matarazzo, 612, Prédio C –2°, 05001-100 São Paulo, Brazil.

E-mail: fernandoars@uninove.br

European Management Review, Vol. 13, 193–205, (2016)

DOI: 10.1111/emre.12079

©2016 European Academy of Management