CEO Implicit Motives: Their Impact on Firm Investment and Firm Performance; Using 6160 annual CEO letters to shareholders for 585 S&P 500 companies for the period 1992 to 2010 to examine how CEO implicit motives impact the quality of their judgment and decision making

CEO Implicit Motives: Their Impact on Firm Investment and Firm Performance

Kevin J. Veenstra McMaster University – DeGroote School of Business

April 30, 2013

Using 6160 annual CEO letters to shareholders for 585 S&P 500 companies for the period 1992 to 2010, I examine how CEO implicit motives (need for Achievement, need for Power, and need for Affiliation) impact the quality of their judgment and decision making. I find that while implicit motives for CEOs as a group have not changed significantly over time, there is a marked relationship between the competitiveness of a company’s industry type and the implicit motive attributes of the CEO it hires. Using revenue growth, size adjusted stock returns, return on assets, and Tobin’s Q as proxies for JDM quality, I show that after controlling for firm and year fixed effects, performance is increasing in a CEO’s need for power and decreasing in a CEO’s need for achievement; and that the effects of implicit motives are persistent, even three years after being measured. My results suggest that, in addition to characteristics such as functional career track, military experience, and number of external board seats held, implicit motives play a significant role in the determination of what makes each CEO unique and drives subsequent firm performance. My results have practical implications for many company investor relations departments who in recent years have been discontinuing the annual CEO letter, but may have not considered this useful disclosure role.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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