Do CEOs matter? Evidence from Hospitalization Events

Using variation in firms’ exposure to their CEOs resulting from hospitalization, the authors estimate the effect of chief executive officers (CEOs) on firm policies, holding firm‐CEO matches constant. The authors document three main findings. First, CEOs have a significant effect on profitability and investment. Second, CEO effects are larger for younger CEOs, in growing and family‐controlled firms, and in human‐capital‐intensive industries. Third, CEOs are unique: the hospitalization of other senior executives does not have similar effects on the performance. Overall, the author's findings demonstrate that CEOs are a key driver of firm performance, which suggests that CEO contingency plans are valuable.