CEO tenure and firm performance in Finnish companies

The purpose of this master’s thesis is to examine the relationship between CEO tenure and firm performance in Finnish medium and large limited liability companies. There have been no studies in Finnish context, which would have examined the relationship of these two factors, at least to my best knowledge. The tenure of the CEO is the main interest of this study. The CEO has been selected as the person of interest as they are the most influential individual decision-maker in a company. Although, also other factors closely connected to the CEO, their performance, and power in the company are also examined in this research. The firm performance measurement used in this study is Return on Assets (ROA). The used data in this master’s thesis was received from Suomen Asiakastieto for the purposes of this research. The final sample derived from the received data included 3391 companies, of which 141 were public companies, and 3250 private companies. There was a total of 17059 firm-year observations for the observed timeperiod of 2000-2021. The method used in this master’s thesis is regression analysis. The previous research has had mixed results in various contexts. Empirical findings are partially aligned with some of the previous research. Empirical results of this study found a positive and statistically significant relationship between the CEO tenure and firm performance. This result indicates that the performance of the CEO increases throughout their tenure, although the amount of performance increase is rather miniscule. Furthermore, a statistically significant negative relationship was found between firm performance and CEO duality. CEO duality is a situation in which the same individual holds both the positions of Chairman and the CEO. Moreover, a statistically significant relationship between board size and firm performance was found. These results indicate that CEO duality and large boards are an unwanted situation for firm performance, and hence for the company’s shareholders