Do CEO Characteristics Constrain Firm Growth? Evidence from the U.S. Energy Industry
Adel Dhaher A. AlresheediObjectives
Drawing on Upper Echelons Theory (UET), this study examines the relationship between CEO characteristics and firm growth among publicly listed U.S. energy firms. Specifically, it investigates the effects of CEO tenure, CEO compensation, financial expertise, financial education, technical education, and CEO age on firm growth, thereby extending the application of UET to firm growth in the context of the U.S. oil and gas sector.
Material and Methods
The study employs panel data from 26 publicly listed U.S. oil and gas companies over the period 2011–2024. Firm growth is proxied by firm size, while the explanatory variables capture selected CEO demographic, educational, experiential, and compensation characteristics. Panel-data econometric techniques are employed to examine the relationship between CEO characteristics and firm growth.
Results
The empirical findings indicate that CEO tenure has a negative and statistically significant effect on firm growth, suggesting that longer CEO tenure may be associated with reduced flexibility in responding to strategic change. CEO compensation is positively and significantly associated with firm growth, indicating that compensation incentives may encourage expansion-oriented managerial decisions. Financial expertise, financial education, and technical education exhibit negative and statistically significant relationships with firm growth, suggesting that greater specialization may be associated with more conservative managerial behavior and reduced strategic flexibility. In contrast, CEO age does not have a statistically significant effect on firm growth.
Conclusion
The findings provide empirical support for the central premise of UET that CEO characteristics are associated with organizational outcomes and strategic orientation. The study extends the UET literature by examining firm growth, proxied by firm size, in the capital-intensive U.S. energy sector. The findings also have practical implications for boards of directors and shareholders concerning CEO selection, executive compensation design, and strategic leadership in energy firms.