Study: Do MBAs make better CEOs? Not necessarily.
MBA News Barbara Bierach / 09-29-2010
So far, when researchers asked the question whether MBAs make better CEOs the answer has been yes, they deliver better shareholder value in the long term. New research, though, threatens this conclusion, reports BusinessWeek.
Researchers from the University of Colorado at Boulder, the University of New Hampshire and Georgia State University found that "hiring new CEOs with MBA degrees leads to short-term improvements in operating performance. We, however, do not find a significant systematic relationship between CEO education and long-term firm performance."
According to their study - which examined 1,500 companies and used several performance metrics including return on assets and stock returns - CEO education does not seem to be an appropriate measurement for CEO ability. Among the CEOs surveyed about 39 percent had MBAs, and of that group, 63 percent attended a "top 20" program.
While a CEO's MBA had little or no impact on their company's long-term performance, it was a key factor in whether the CEO was hired in the first place. Even when a CEO with an MBA is fired, the researchers found that companies tend to hire another MBA to replace him. Say the researchers: "It is still rather puzzling (at least to us) that education affects CEO hiring decisions even though it has little effect on long-term firm performance."
