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Journal of Finance & Economics Research - Volume 5, Issue 2 2020
By Sani Saidu, Usman Belo Baba
10.20547/jfer2005201
Keywords: CEO tenure, expertise, experience, firm performance, multiple memberships.
Experiences in many aspects are important in determining factor for the selection and promotion of employees, especially to managerial positions. However, empirical evidence on the contribution of CEO experiences to firm outcomes is limited. This paper attempts to address the literature gap by examining the impact of CEO experience on the firm financial performance of the listed firms in the financial sector. The study uses balanced panel data for six years from 2011 to 2016 in running regression analysis. Independent variables that include the CEO tenure and CEO multiple board memberships are considered in measuring the CEO experience. The result from the analysis indicates that CEO tenure has a negative effect on firm performance measured by ROA. The finding supports the view of the agency theory that CEO has an opportunistic tendency when they stay longer than the industry average. The implication is that the CEO that stays long in office need to be closely monitored so that they could use their know-how in pursuing the goals of the organisation rather than their selfish goals.