IACMR Research Seminar Series

IACMR Research Seminar Series Session #17

TopicDo Investors Prefer Democratic or Republican CEOs? A Systematic Study of Shareholder Reactions to New CEOs’ Political Ideologies
Speaker: David Zhu, Arizona State University
Time: 9:00- 10:15 am, Oct. 27, 2021 (China Time)
Language: Chinese
Register link: https://www.xcdsystem.com/iacmr/forms/index.cfm?ID=xlLh4en


We investigate how investors react to the political ideology of a newly appointed CEO. Building upon existing research on market reactions to CEO successions and theories about political ideologies, we suggest that investors will react more negatively to the appointment of a more liberal CEO. Our theory explains that capital market participants, whose primary concern is the superior performance of a firm, will welcome conservative CEOs who are expected to improve firm performance over liberal CEOs who tend to support potentially less profitable investments that benefit other stakeholders more. In addition, we propose that the negative effect of a new CEO’s liberal ideology on market reaction is strengthened by the pre-succession social performance of the firm but weakened by the firm’s pre-succession financial performance and by the ownership of dedicated institutional investors. Using a large sample of S&P 1500 firms between 2001 and 2019, we find support for our theory. This study highlights the important impact of a neglected attribute of new CEOs on market reactions. It also advances strategic leadership research by showing the effect of CEO political ideology on market valuation, beyond its effect on strategic decisions of CEOs.  


David H. Zhu is Professor in Management and Entrepreneurship and Dean’s Council Distinguished Scholar at the Arizona State University. His research builds on behavioral theories to examine strategic decision making of top executives and entrepreneurs, innovation and entrepreneurship, corporate governance, and corporate strategy. He also studies the structure of corporate elite networks and resource exchange networks. His work has been published in top scholarly journals, including Academy of Management JournalAdministrative Science QuarterlyOrganization Science, and Strategic Management Journal, and has received several international awards from Academy of Management and Strategic Management Society. He is incoming Deputy Editor of Management and Organization Review and editorial board member of AMJ, AMR, ASQ, and SMJ. He has also served the academic community in several leadership roles, such as the Associate Program Chair of the Strategic Leadership and Governance group of SMS, English program chair (macro) and research committee chair (macro) of International Association for Chinese Management Research, and the overall coordinator of Chinese Management Scholars Community. In addition, he serves as a research committee member of the STR division of the Academy of Management. Zhu is an experienced business educator and has taught and coached many top executives around the world. His research has been featured in Harvard Business ReviewWall Street JournalForbes, and BBC Future, among others.