Three Essays on General Human Capital Around the World

Abstract

The role of human capital in shaping corporate policies and outcomes is of interest to academics and market participants in recent years. Researchers focus on the effects of two types of top managers generalist chief executive officers (CEOs), whose skills are transferrable across firms and industries, and specialist CEOs, whose skills are valuable only within an organization on firm performance. However, whether and how top executives' general human capital affects corporate strategic decisions and outcomes globally and the role of country-level institutions in these effects remain largely unexplored. In this thesis, I address these questions by constructing a novel general managerial ability index using biographical information of CEOs from countries around the world. This thesis comprises three studies. Study I examines the impact of CEOs' general managerial abilities on firm innovation worldwide. I find that, overall, general managerial abilities tend to facilitate corporate innovation, but this positive association varies across countries. Although generalist CEOs tend to encourage firm innovation in countries with developed institutions, they are more likely to undermine innovation in countries with weak institutions. Finally, I report that generalist CEOs' risktaking and innovation activities have greater economic value in countries with developed institutions. Overall, my findings highlight the role of upper-echelon executive human capital in the global economy and how country-level institutions can exploit executive human capital to enhance innovation. Study II examines the effect of CEOs general managerial abilities on firms' voluntary corporate social responsibility (CSR) disclosure in the international setting.I find a positive association between general managerial abilities and voluntary CSR disclosure. Additional analyses reveal that the positive effect of generalist CEOs is more pronounced in countries that have a stakeholder-oriented culture, a lower tolerance for uncertainty, greater long-term orientation, and a collectivist culture. Finally, I document that generalist CEOs attract more external opportunities and remuneration from voluntary CSR disclosure than do specialist CEOs, supporting the reputation benefit view. Overall, my findings contribute to a growing body of literature on the costs and benefits of hiring generalist CEOs and the determinants of voluntary CSR disclosure in the global economy. Study III examines whether CEOs' general managerial abilities affect firms' future stock price crash risk. Using a comprehensive sample of 107339 CEO-firm-year observations in 30 countries from 2002 to 2019, I find that generalist CEOs are associated with a lower stock price crash risk, and this negative association is strengthened by country-level investor protection and firm-level external and internal monitoring. Channel analyses show that general managerial abilities reduce stock price crash risk by reducing bad news hoarding because of reputational concerns and improved investment efficiency. My findings shed new light on the economic consequences of hiring generalist CEOs by showing their effect on the stability of the global financial system and economy. Overall, this thesis provides the first insights into the role of generalist CEOs in global markets and the importance of country-level institutions in shaping the positive effects of executive general human capital. It extends the literature on the economic effects of upper-echelon executive human capital to the international setting and sheds new lights on the relative value of generalist and specialist CEOs. My findings have important implications for capital market participants and policymakers. Show more