Chicago Booth Review Podcast How much does a CEO really matter?
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Nov 12, 2025 Mike Gibbs, a faculty member at Chicago Booth, explores the impact of CEOs on organizational success through extensive economic research. He discusses methods used to measure leadership's effect on performance, including surprising stock market reactions to CEO exits. Gibbs distinguishes between leader and manager CEOs, arguing that the former thrive in innovative firms. He highlights the rarity of effective leadership styles, the essential role of trustworthy bosses, and how top managers can significantly boost employee productivity.
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Measuring Leadership Economically
- Economists measure leadership using natural experiments like unexpected CEO death and personnel reassignments.
- These methods reveal causal effects of leaders on firm value and employee productivity.
Market Reacts To Sudden CEO Losses
- Unexpected CEO departures usually cause stock prices to fall by several percent on average.
- Exceptions occur when the market views the CEO as harmful, such as some founder deaths or surprise retirements.
CEO Traits And Personal Signals Matter
- CEO traits like education, cognitive ability, gender, and military service systematically correlate with firm behavior.
- Personal signals (buying yachts, legal troubles) also predict negative stock reactions when revealed.