Publications

We estimate the effect of expatriate CEOs on firm performance using Hungarian administrative data. Comparing firms with expatriate and local CEOs following a foreign acquisition, we find that expatriates increase TFP by 8.5% and sales by 118%. Interpreting these effects through the lens of an industry equilibrium model reveals that 87% of revenue gains stem from TFP improvements, with capital deepening and export market access contributing 10% and 3%. The decomposition is similar across sectors, except export gains are absent in nontradable sectors. Our results suggest that expatriates create value primarily through superior general management skills.

We study how much CEO replacements contribute to firm growth and show that traditional fixed effect estimates substantially overstate CEO influence and create spurious trends due to small-sample bias. We introduce a placebo-controlled, difference-in-differences method using non-changing firms to correct bias in second moments. Simulations confirm the method is robust to persistent shocks, short tenures, and unbalanced panels. Naive estimates on 60,000 Hungarian CEO transitions attribute 40–60% of revenue variance to CEO changes; our debiased method finds 20–30%. The corrected estimates show immediate, persistent effects without false pre-trends.

How much do CEOs matter for firm performance? We estimate the causal effect of CEO quality on productivity using comprehensive administrative data covering the universe of Hungarian firms and CEOs from 1992–2022. We develop a production function framework that separates owner-controlled strategic decisions from CEO-controlled operational decisions. To address the severe measurement error in CEO fixed effects arising from short tenures, we introduce a placebo-controlled event study design: we compare actual CEO transitions to randomly assigned fake transitions in firms with stable leadership. The results reveal that a CEO better than the incumbent increases firm performance by 3% while a worse CEO decreases it by 2%. CEO changes contribute to the variance growth of productivity by 30% in the first 10 years of the firm’s existence. The placebo-controlled methodology provides a general solution for estimating individual effects in short-panel settings.

Management quality drives firm performance and aggregate productivity, yet the supply of managerial talent remains poorly understood. A key friction is that hired managers cannot fully appropriate the surplus they generate, unlike entrepreneurs who own their firms, creating a wedge between private and social returns to management. Here we develop a general equilibrium model to quantify how this corporate governance friction distorts talent allocation between entrepreneurship, management, and employment. Using the universe of Hungarian firms and CEOs (1986–2022), we exploit the transition to capitalism—when the count of enterprises increased from 21,000 to 115,000 in three years—to identify the parameters of the model. We find that managers capture only 60% of the surplus they create, resulting in too few professional managers and too many less-productive entrepreneurs. Eliminating this friction would raise GDP per worker by 4% through improved occupational composition. Uniform subsidies fail to correct the misallocation, raising GDP by only 0.1%. Our results show that management interventions’ aggregate effects depend critically on targeting the specific friction between hired managers and entrepreneurs rather than expanding the overall pool of business leaders.