RISK, RETURN AND CEO’S CHARACTERISTICS AS FACTORS OF COMPANY’S EFFICIENCY
Abstract
The aim of this paper is to combine and analyse the relationship between the company’s financial characteristics: risk, return, and the leaders’ characteristics for various stages of the organization’s life cycle. The results of the empirical analysis of this paper reveal the dependencies between both the physiological and personal characteristics of leaders. Such indicators as education, previous experience as a Chief Executive Officer (CEO), CEO remuneration, and the number of years in the current position were evaluated for this analysis. The sample is represented by 409 companies included in the S&P 500 index. The profitability of the companies is assessed using an integral indicator, whereas the risk is assessed using the Leverage Beta coefficient and the Altman Z-account. The stages of the company’s life cycle are distinguished through the ratio of cash from operating, financial, and investment activities. This paper also examines the position of companies as an analogue of the portfolio and is noted on the Capital Market Line (CML). To assess the relationship, decision trees were built taking into account risk and return for different stages of the life cycle of companies: “growth”, “maturity” and “decline”. As a result, it has been concluded that different characteristics of leaders are significant at various stages of the organization’s life cycle. So, for the “growth” stage, the remuneration has a positive effect on the risk indicator, but after a certain level of increase, it has a completely inverse relationship. The indicator for a leader’s education is non-linear, and the education received in the financial sphere has a negative relationship with the company’s risk indicator for the “growth” stage. The indicator for the CEO’’s previous work is more significant for risk assessment than the company’s return.
Keywords: business indicators of a company, Life Cycle Organization, Capital Market Line, Capital Asset Pricing Model, Chief Executive Officer, characteristics of leaders
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About the Authors
Yulia S. Ovanesova – Cand. Sci. (Economics); Associate Professor, Higher School of Economics University, Moscow, Russia. E-mail: Julia.ovanesova@yandex.ru. SPIN РИНЦ 6345-8740 . ORCID 0000-0002-0410-550X. ResearcherID L-3157-2015. Scopus Author ID 2002362988
Artem V. Ponomarev – Master of Economics, Higher School of Economics University, Moscow, Russia. E-mail: Avponomarev_2@edu.hse.ru
For citation: Ovanesova Yu.S., Ponomarev A.V. Risk, Return and CEO’s Characteristics as Factors of Company’s Efficiency // Beneficium. 2023. Vol. 3(48). Pp. 89-103. (In Russ.). DOI: 10.34680/BENEFICIUM.2023.3(48).89-103
