A new study has revealed that whether or not a company''s CEO holds a college degree from a top school has no bearing on the firm''s long-term performance.
The research conducted by University of New Hampshire also showed that when it comes to getting canned for poor performance, CEOs with degrees from the nation''s most prestigious schools are no safer than the average CEO.
"The findings suggest that both boards and researchers should use caution in placing too much emphasis on an individual''s education when trying to assess their ability to lead the company and maximize shareholder value," said Brian Bolton, lead author of the research and assistant professor of finance at the Whittemore School of Business and Economics at the University of New Hampshire.
Analysis of the research is based on relationship between CEO education, CEO turnover, and firm performance.
The researchers used six main measures of CEO education: whether or not the CEO attended a top 20 undergraduate school, whether or not the CEO has an MBA, law or master''s degree, and whether or not the MBA or law degree is from a top 20 program.
The study includes nearly 15,000 years of CEO experience data and more than 2,600 cases of CEO turnover from 1992 to 2007.
Hiring new CEOs with MBA degrees does lead to short-term improvements in operating performance.
However, the researchers did not find a significant systematic relationship between a top manager’s education and long-term firm performance.
The research is presented in the working paper ‘CEO Education, CEO Turnover, and Firm Performance.’