Managing with Style: The Effect of Managers on Firm Policies

TLDR

The study examines how individual managers influence corporate behavior and performance, and links these effects to observable managerial characteristics. The authors use a manager‑matched panel dataset to track top managers across firms over time. Manager‑fixed effects drive substantial heterogeneity in investment, financial, and organizational decisions, reveal distinct managerial styles, and correlate with higher performance, compensation, and better governance, while older executives are more conservative and MBA holders more aggressive.

Abstract

This paper investigates whether and how individual managers affect corporate behavior and performance. We construct a manager-e rm matched panel data set which enables us to track the top managers across different e rms over time. We e nd that manager e xed effects matter for a wide range of corporate decisions. A signie cant extent of the heterogeneity in investment, e nancial, and organizational practices of e rms can be explained by the presence of manager e xed effects. We identify specie c patterns in managerial decision-making that appear to indicate general differences in “ style” across managers. Moreover, we show that management style is signie cantly related to manager e xed effects in performance and that managers with higher performance e xed effects receive higher compensation and are more likely to be found in better governed e rms. In a e nal step, we tie back these e ndings to observable managerial characteristics. We e nd 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.