The Impact of Entrepreneur-CEOs on Company Performance

Abstract

The purpose of this paper is to empirically examine the relationship between entrepreneur chief executive officers (CEOs) and firm performance. Based on the theoretical argument that microfinance entrepreneur-chief executive officers (CEOs) are “motivated agents” with a unique ability to hire and socialize mission-oriented staff, the paper develops a matched sample of 91 Pakistani firms and compared their performance using both accounting and market-based measures. Independent sample t-tests were used to empirically test the opposing predictions. Data were obtained from the PSX database and companies’ websites of sample firms. The results of the data analysis indicate that there is a statistically significant performance difference between entrepreneur-led and non-entrepreneurs led firms. Such performance difference is especially evident when the paper focusses on the accounting-and market based firm performance measures such as return on assets and Tobin’s q. Surprisingly, non-entrepreneurs led firms performed worse than those led by entrepreneur CEOs. The findings of the study provided empirical support for entrepreneur CEO impact on firm performance. The study makes an original contribution to the on-going research on strategic leadership by exploring the performance effect of entrepreneur CEOs and the corresponding alternative theoretical explanations.