CEO busyness and investment efficiency: evidence from Indonesia
Publication Name
Journal of Financial Reporting and Accounting
Abstract
Purpose: This study aims to explore the relationship between the level of busyness of Chief Executive Officers (CEOs) and investment efficiency in the context of emerging markets. Design/methodology/approach: The sample includes firms listed on the Indonesia Stock Exchange from 2010 to 2018 using ordinary least square estimation. Findings: The findings suggest that companies led by busy CEOs tend to exhibit lower investment efficiency, thus providing support for the hypothesis that as CEOs’ commitments increase, their ability to concentrate on the company diminishes. Furthermore, our analysis reveals that companies with busy CEOs tend to demonstrate a greater tendency to over-invest, potentially in response to market pressures to showcase strong performance. A more in-depth examination of the data shows that the negative impact of busy CEOs on investment efficiency is especially noticeable in firms lacking risk and management committees (RMC). Practical implications: These findings have substantial practical implications for the structuring and composition of corporate boards. They highlight the significance of conducting comprehensive assessments to gain insights into the external commitments of incoming CEOs. Originality/value: This study underscores the importance of establishing RMC.
Open Access Status
This publication is not available as open access