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  • Journal of Financial and Quantitative Analysis, Volume 44, Issue 2
  • April 2009, pp. 439-466

Founder-CEOs, Investment Decisions, and Stock Market Performance

  • Rüdiger Fahlenbrach (a1)
  • DOI:
  • Published online: 01 April 2009

Eleven percent of the largest public U.S. firms are headed by the CEO who founded the firm. Founder-CEO firms differ systematically from successor-CEO firms with respect to firm valuation, investment behavior, and stock market performance. Founder-CEO firms invest more in research and development, have higher capital expenditures, and make more focused mergers and acquisitions. An equal-weighted investment strategy that had invested in founder-CEO firms from 1993 to 2002 would have earned a benchmark-adjusted return of 8.3% annually. The excess return is robust; after controlling for a wide variety of firm characteristics, CEO characteristics, and industry affiliation, the abnormal return is still 4.4% annually. The implications of the investment behavior and stock market performance of founder-CEO firms are discussed.

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