CEO characteristics and firm performance: evidence from a Southeast Asian country

Abstract

Purpose The purpose of this study was to investigate how chief executive officer (CEO) characteristics, including age, education, nationality and particularly gender, influence firm performance in a developing Southeast Asian Country (Indonesia). Design/methodology/approach The study uses balanced firm-level panel data for 203 nonfinancial companies listed on the Indonesia Stock Exchange from 2010 to 2020. Return on assets, return on equity and Tobin’s Q were used to measure firm performance. The data were analyzed using panel data regression analysis, including a fixed effects model with clustered standard errors. Findings The results indicate that female CEOs, education and nationality enhance firm performance, while CEO age can either improve or reduce firm performance. Numerous robustness checks were performed; the results were consistent with those in the main analysis. Research limitations/implications Individual characteristics should be considered when appointing CEOs. Some CEO characteristics enhance firm performance. Female CEOs bring new perspectives, while older CEOs’ longer experience adds a competitive advantage. More educated CEOs have a better ability to deal with challenging intellectual activities, and CEOs from foreign countries better understand international market regulations. However, some characteristics may reduce firm performance, for example, older CEOs are more conservative and unable to adapt to changing business environments. Originality/value This study contributes to corporate governance studies by synthesizing CEO characteristics and investigating their relationship with firm performance. Moreover, it emphasizes that developing countries such as Indonesia have different economic, legal, social and cultural environments than developed countries, especially Western countries.

The Impact of CEO Characteristics on the Financial Performance of Family Businesses Listed in the Euronext Exchange

“…CEO Gender: Espinosa-Mendez and Correa (2022) used a Chilean sample to observe superior financial performance in SMEs led by female CEOs. A similar result was obtained by Suherman et al (2023) for an Indonesian sample, with female CEOs providing objectivity in the assessment of management. A plethora of earlier studies concurred with Kotiranta et al (2007), Adams et al (2009), andNg (2017).…”

“…Peterson et al (2001), Huang et al (2012) and Belot and Serve (2018) observed that older CEOs positively influenced financial reporting quality. Conversely, using a sample of Indonesian firms, Suherman et al (2023) observed that older CEOs were conservative and averse to the necessary risk taking needed to explore new products and markets. Consequently, their firms underperformed.…”

The role of female executives in capital structure decisions: evidence from a Southeast Asian country

“…Furthermore, the discourse surrounding the relationship between women on boards and a firm's capital structure remains unresolved. toward risk aversion (Cardillo et al, 2021;Suherman et al, 2023b). Notably, Palvia et al (2015) highlighted that female chief executive officers (CEOs) take a more cautious approach to executing corporate strategies than their male counterparts owing to their lower risk preferences.…”

“…Indonesia's corporate governance structure does not adhere to a one-tier system. In such a system, the board of directors and the board of commissioners are integrated into a single entity, in which board members bear the responsibility for making both operational and strategic decisions for the company (Darmadi, 2011;Khan et al, 2020;Suherman et al, 2021b;2023a, 2023b. In contrast, a two-tier system contains a distinct board of directors and a separate board of commissioners, with the latter being tasked with overseeing the performance of the former.…”

“…The theoretical underpinning of our investigation draws from agency theory, which posits that women often assume a more vigilant supervisory role due to their inherent inclination toward risk aversion (Cardillo et al , 2021; Suherman et al , 2023b). Notably, Palvia et al (2015) highlighted that female chief executive officers (CEOs) take a more cautious approach to executing corporate strategies than their male counterparts owing to their lower risk preferences.…”