The influence of chief eecutive officer reputation on performance of public firms in atin merica

Abstract

One of the control mechanisms at the disposal of shareholders is based on the reputation of corporate executives. A good personal reputation tends to discourage opportunistic behaviors and reduce limited rationality costs. In light of agency theory and transaction cost economics theory, the reputation of corporate executives is believed to not only reduce such costs but to benefit the reputation of the firm, potentially improving corporate performance. In this study we investigated the effect of the reputation of the chief executive officer (CEO) on corporate performance in 46 Latin American public firms traded on the New York stock market as of 31 December 2013. The findings were submitted to descriptive analysis, testing of differences between means, Pearson correlation coefficients and multiple linear regression. Among our findings, i) media visibility had a favorable effect on CEO reputation, ii) on the average, CEO reputation was better in firms from Brazil than in firms from other Latin American countries, and iii) the reputation of the CEO had a significant and positive impact on corporate performance. Our results confirm the importance of choosing a CEO with a good reputation to head the firms of the sample.