Essays on Chair-CEO age dissimilarity : a thesis presented in partial fulfillment of the requirements for the Degree of Doctor of Philosophy in Accountancy at Massey University, Auckland, New Zealand. EMBARGOED until 15 January 2027

Abstract

This thesis investigates the impact of age dissimilarity between the Chairman (hereafter Chair) and the Chief Executive Officer (hereafter CEO) on corporate decision-making and performance outcomes. For example, when Chairs and CEOs belong to different generations, they may possess divergent values and risk preferences. These differences can affect internal harmony, influencing the quality of external information disclosure and the strength of internal monitoring mechanisms. Moreover, age dissimilarity may shape strategic decision-making, affecting investment efficiency and firm value. Understanding the implications of Chair-CEO age dissimilarity is crucial for policymakers, corporate executives and external investors. This research consists of three distinct but related research essays: (i) Chair-CEO Age Dissimilarity and Annual Report Tone; (ii) Chair-CEO Age Dissimilarity and Investment Efficiency; and (iii) Chair-CEO Age Dissimilarity and Firm Value. My thesis utilises data from Chinese-listed firms to address these research questions.

Essay One examines the impact of any age dissimilarity between the Chair and the CEO on the tone of a firm’s annual report. A large age dissimilarity may lead to divergent priorities and communication styles, resulting in a more cautious or less optimistic tone in the annual report. Based on 27,030 firm-year observations from 2010 to 2023, the analysis reveals a significant negative association between Chair-CEO age dissimilarity and the positive tone of annual reports. Specifically, a 1% increase in age dissimilarity results in a 0.048% decline in report positivity. The relationship is more pronounced in firms with higher external monitoring pressure, lower controlling rights concentration and greater information asymmetry, and within family firms. These findings underscore the importance of the Chair-CEO dynamic in shaping a firm’s communication, and contribute to the literature on corporate governance and the tone of annual report disclosures.

Essay Two investigates the influence of age dissimilarity between the Chair and the CEO on the firm’s investment efficiency. I argue that age dissimilarity between these key leadership positions foster divergent perspectives, values, and priorities, and may create communication barriers that hinder effective investment decision-making. Drawing on 22,792 firm-year observations from 2001 to 2022, by companies listed on the Chinese Stock Exchange, my analysis provides evidence a negative association between age dissimilarity among Chair-CEO pairings and firms’ investment efficiency. Further cross-sectional analyses highlight the pronounced nature of this relationship within firms characterised by competitive market environments, dispersed ownership structures, and non-state-owned enterprise (hereafter non-SOE) status. This research provides valuable insights for practitioners and policymakers seeking to enhance firm performance through optimal leadership dynamics.

Finally, Essay Three examines the impact of Chair and CEO age dissimilarity on firm value. I explore whether the intensity of board monitoring changes where there is an age dissimilarity between the Chair and the CEO, and whether it moderates the relationship between their age dissimilarity and the firm’s value. From 3,870 Chinese Stock Exchange-listed firms, 37,200 firm-year observations between 2001 and 2021 are examined. Results show that the higher the age dissimilarity of Chairs and CEOs, the greater the decrease in firm value. Additionally, an increased age dissimilarity between the Chair and the CEO is linked to boards meeting less frequently (resulting in low board monitoring intensity), which negatively impacts firm value. This effect is more pronounced in firms with higher agency conflict, low concentration, dispersed ownership, and non-SOE status. These findings stress the importance of increasing board meeting frequency where there is an age dissimilarity in those in top leadership roles, in order to enhance internal monitoring and thereby mitigate any potential negative impacts on firm value from the age dissimilarity.

The findings suggest that a significant age dissimilarity between a Chair and a CEO can adversely affect communication, investment efficiency, and firm value. For practitioners, the research underscores the need to align leadership styles and foster effective communication to mitigate the adverse effects of any age dissimilarities. Policymakers are encouraged to strengthen internal monitoring practices, such as increasing the frequency of board meetings, to counteract the potential downsides of leadership misalignment.