CEO Tenure and the Cost of Equity Capital

Authors

  • Sangshin Pae University of North Georgia
  • Hyung Tae Kim California State University Fresno
  • Young-Won Her California State University Northridge

DOI:

https://doi.org/10.33423/jabe.v25i4.6342

Keywords:

business, economics, CEO tenure, cost of equity capital, CEO career concerns, risk-taking

Abstract

In this study, we investigate the relationship between CEO tenure and the implied cost of equity capital. Using 29,519 firm-year observations spanning the period from 1993 to 2021, we find a negative relationship between CEO tenure and the cost of equity. The negative relationship between CEO tenure and the cost of equity indicates that the cost of equity is higher for firms with CEOs in their early tenure, and the cost of equity is lower for firms with CEOs in their later tenure. Overall, our empirical evidence supports that investors perceive CEO tenure as a value-relevant signal in determining the cost of equity capital.

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Published

2023-08-25

How to Cite

Pae, S., Kim, H. T., & Her, Y.-W. (2023). CEO Tenure and the Cost of Equity Capital. Journal of Applied Business and Economics, 25(4). https://doi.org/10.33423/jabe.v25i4.6342

Issue

Vol. 25 No. 4 (2023)

Section

Articles

License

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