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MBA CEOs, Short-Term Management and Performance

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Abstract

There is ample discussion of MBA self-serving values in the corporate social responsibility literature, and yet empirical studies regarding the corporate manifestations and consequences of those values are scant. In a comprehensive study of major US public corporations, we find that MBA CEOs are more apt than their non-MBA counterparts to engage in short-term strategic expedients such as positive earnings management and suppression of R&D, which in turn are followed by compromised firm market valuations.

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Notes

  1. We are not implying that MBA education leads to short-term practices that are destructive of firm value. It may be that individuals who favor such practices chose MBA business educations versus programs in the arts or sciences, the latter of which may find favor with those planning careers that are more socially or technically oriented.

  2. To enhance the validity of our estimates, we drop SIC years with less than 10 observations.

  3. Results stayed the same if we include the top 10 programs only.

  4. In analyses, not reported, we confirmed that positive earnings management and reducing R&D did increase contemporaneous return on assets.

  5. The estimates of the indirect effect are assumed to be normally distributed given the sample size.

  6. There are currently numerous other measures of EM but these could not be used in our analysis due to the unavailability of data, the specialized nature of a measure to particular circumstances (M&A, restructuring, and management buybacks) or industry, and changes in reporting regulations. For example, Moehrle (2002), measured EM through the decision to reverse and the amount of reversal of restructuring charges; he hand-collected data through newspaper searches. Schrand and Wong (2003) used a method specific to the banking industry, which does not pertain to our sample. Balsam et al. (2003) gauged EM through the timing of allocation of the value of stock option grants which is no longer practical due to changes in statutory regulations. Picconi (2006) used off balance sheet items and Dhaliwal et al. (2004) used control variables to which we had no access.

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Authors and Affiliations

  1. HEC Montreal, Montreal, Canada

    Danny Miller

  2. University of Alberta, Edmonton, Canada

    Danny Miller

  3. University of Rhode Island, Kingston, RI, USA

    Xiaowei Xu

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Appendices

Appendix 1

See Table 4.

Table 4 Robustness test for MBA, short-term management and performance
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Appendix 2

See Table 5.

Table 5 Earnings management, R&D, and compensation growth
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Appendix 3

See Table 6.

Table 6 MBA CEOs, top schools, and short-term management
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Miller, D., Xu, X. MBA CEOs, Short-Term Management and Performance. J Bus Ethics 154, 285–300 (2019). https://doi.org/10.1007/s10551-017-3450-5

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