This study examines the influence of specialist CEOs on the probability of failure and survivability of initial public offering (IPO) firms. We construct a generalist skills index based on CEOs' past employment history in order to classify CEOs into specialist and generalist ones. Specialist CEOs pursue a career in particular functional roles, firms and industry sectors, as opposed to generalist CEOs who accumulate their work experience through various positions, firms and industries. We uncover strong evidence that IPO firms with a specialist CEO have a lower probability of failure and a longer time to survive in subsequent periods following the offering. The findings suggest that specialist managerial ability has significant implications for post-issue performance of newly listed firms. Additionally, specialist CEOs may have incentives that are more aligned with those of the firm and its shareholders; thus, they are more likely to enhance the viability of IPO firms for a longer period of time.

We study whether firms that are led by chief executive officers (CEOs) with law degrees (lawyer CEOs) have different credit ratings and costs of debt from other firms. Our sample consists of Standard & Poor’s 1500 firms from 1992 to 2020, 9.2% of which have lawyer CEOs. We find that these firms have better credit ratings, compared to other firms. On average, their cost of debt is 10% lower than that of firms led by CEOs without legal backgrounds. Our results are robust to different specifications, sampling methods, and controls, such as firm and CEO characteristics. We identify two ways that CEO expertise translates into higher credit ratings: lawyer CEOs are associated with a lower future volatility of stock returns and a reduction in information risk. The decreased business risk and better financial reporting are associated with 5% lower auditing fees for firms with lawyer CEOs.

We examine the role of award-winning CEOs in corporate innovative activities. We find no significant difference in innovation outputs between firms of media award-winning CEOs and a matched sample of predicted winners. However, firms headed by winners of non-media awards generate significantly more patents and citations in the second and third year after the award. Firms led by CEO-winners of media awards attract more interest in Google and see an increase in the number of financial analysts that follow them. These effects likely exert more pressure on managers to meet short-term goals and hence impede the firms’ innovation. We do not find the same effects for firms that have CEOs who win non-media awards. The latter category sees an improvement in employee treatment following the award year. These different channels explain why innovation only increases for firms that are headed by CEOs who win non-media awards.

The study examines the effect of earnings management by classification shifting on firm success, focusing on the survival of newly listed firms. We argue that shifting income-decreasing expenses from core to special items should negatively associate with future operating performance because of improper signaling of actual repeatable core profitability. We find that classification shifting strongly and negatively affects future Initial Public Offering (IPO) success and survival. We further identify the economic mechanisms that drive this finding and observe that our results are mitigated when the quality of external corporate governance alleviating agency concerns is stronger, also for IPO firms operating within stronger business contexts. Therefore, in an environment that facilitates firm survivability, the existence of weaker than reported sustainable performance may not end up materializing in the form of lower firm survivability as these factors aid firms' continuing operations from a business perspective. Our findings provide evidence of the longer-term implications of a method of earnings management that has long been considered “soft” and without any longer-term reversing consequences.