Abstract:
This paper introduces a new explanation for the time variation in the extent to which CEOs matter for firm performance: the professionalization of the role. We explore whether increased access to specialized knowledge and greater codification of executive responsibilities rendered CEOs increasingly consequential for firm outcomes over time. Using a history-to-theory framework, we theorize how individual CEO characteristics account for temporal variation in the CEO effect in the United Kingdom. Then, using a hand-collected dataset of the largest 100 UK companies between 1900 and 2009, we find that the CEO effect in the UK varies between 6 and 17 percent and that professionalization accounts for an increasing share of relative explanatory power of the CEO effect over time.
