This paper investigates whether and how individual managers affect corporate behavior and performance. We construct a manager-firm matched panel data set which enables us to track the top managers across different firms over time. We find that manager fixed effects matter for a wide range of corporate decisions. A significant extent of the heterogeneity in investment, financial and organizational practices of firms can be explained by the presence of manager fixed effects. We identify specific patterns in managerial decision making that appear to indicate general differences in “style” across managers. Moreover, we show that management style is significantly related to manager fixed effects in performance and that managers with higher performance fixed effects receive higher compensation and are more likely to be found in better governed firms. In a final step, we tie back these findings to observable managerial characteristics. We find that executives from earlier birth cohorts appear on average to be more conservative; on the other hand, managers who hold an MBA degree seem to follow on average more aggressive strategies.

It is well documented that the market-to-book ratio and profitability are two key capital structure determinants. However, because the related empirical evidence can be explained by both the tradeoff theory and the costly external financing theory (which includes both the pecking order theory and the market timing hypothesis), a large controversy remains in the finance literature regarding the economic interpretation of these variables. This study focuses on scenarios where the two theories have drastically different or even opposite predictions about these variables. In each case, we find strong evidence in support of the costly external financing theory but inconsistent with the tradeoff theory. We conclude that firms with higher marketto-book ratios are more likely to issue equity not because they intend to downwardly adjust their target leverage ratios, but because they face lower external financing costs. Similarly, firms with higher profitability are more likely to issue debt, not because they intend to move toward their target leverage ratios, but because they face lower debt financing costs. These conclusions remain firm with extensive robustness checks, alternative variable measures, and different sample choices. JEL Classification: G32

This paper examines how early career experiences affect the career path and promotion of managers as well as the managerial style that they develop when becoming CEO. I differentiate between exogenous shocks to managers ’ careers such as the business cycle at starting date and endogenous choices of individuals such as the industry, type and size of firm that someone starts in. I show that the economic conditions at the beginning of a manager’s career have lasting effects on the career path and the ultimate outcome as a CEO. CEOs who start in recessions tend to take longer time to become CEO, are more likely to rise through the ranks within a given firm rather than moving across firms and industries and ultimately end up as CEOs in smaller firms. Moreover, managers who start in recessions have more conservative management styles once the become CEOs. These managers have less leverage in the firm where they are CEOs, rely more on internal investments rather than acquisitions, have lower SG&A and higher ROA. Though it is endogenous, I also examine the impact of early career choices on career progression. I find that certain types of positions are associated with favorable long run outcome of the manager’s careers: Starting in larger and public firms or in the banking industry is associated with faster time to CEO and becoming CEOs in a larger company.

This study examines whether or not size affects the use of debt used by small restaurant firms. Owners often use debt as a mechanism to minimize agency costs in large firms. However, there is no consensus in the literature about how to mea-sure firm size. This study uses different proxies for size and finds the significant measures to be total assets, total sales, number of owners, and number of employees. The study finds number of owners and total assets to be variables with maximum explanatory power.

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