"We investigate the relationship between CEO centrality -- the relative importance of the CEO within the top executive team in terms of ability, contribution, or power -- and the value and behavior of public firms. Our proxy for CEO centrality is the fraction of the top-five compensation captured by the CEO. We find that CEO centrality is negatively associated with firm value (as measured by industry-adjusted Tobin's Q). Greater CEO centrality is also correlated with (i) lower (industry-adjusted) accounting profitability, (ii) lower stock returnsaccompanying acquisitions announced by the firm and higher likelihood of a negative stock return accompanying such announcements, (iii) greater tendency to reward the CEO for luck in the form of positive industry-wide shocks, (iv) lower likelihood of CEO turnover controlling for performance, and (v) lower firm-specific variability of stock returns over time. Overall, our results indicate that differences in CEO centrality are an aspect of firm management and governance that deserves the attention of researchers"--John M. Olin Center for Law, Economics, and Business web site.

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