JRFM：知识资本和组织资本对经济危机期间股票表现的影响：总裁综合能力的调节作用

Article

TheImpactofKnowledgeCapitalandOrganizationCapitalonStockPerformanceduringEconomicCrises:TheModeratingRoleofaGeneralistCEO

ChaehoChaseLee1,2,HohyunKim3andErdalAtukeren1,*

1BSLBusinessSchoolLausanne,RoutedelaMaladière21,1022Chavannes,Swi(erland;chae-ho.lee@bsl-lausanne.chorechair@stud.assist.ac.kr

2SeoulBusinessSchool,aSSISTUniversity,46,Ewhayeodae2-gil,Seodaemun-gu,Seoul03767,RepublicofKorea

3SchoolofManagementandEconomics,HandongGlobalUniversity,558,Handong-ro,Heunghae-eup,Buk-gu,Pohang-si37554,Gyeongsangbuk-do,RepublicofKorea;hkim@

*Correspondence:erdal.atukeren@bsl-lausanne.ch

Abstract:Thisstudyexaminestherelationshipbetweenintangiblecapital(IC)andstockperfor-manceduringthetworecentcrisisperiods,theGFCandCOVID-19.BycategorizingICintoKnowledgeCapital(KC)andOrganizationalCapital(OC),weanalyzetheimpactofeachcapitalonthecrisisreturninthemanufacturingsector.TheresultsshowthatagreaterKCandOCaresignif-icantlyassociatedwithhighercrisisreturnsduringbothperiods.Inaddition,wefindevidencethatgeneralistCEOsstrengthenthisrelationshipwhilespecialistCEOsdonot.WithinfirmsledbyageneralistCEO,theCEO’stenurepositivelymoderatestheassociationbetweeneachfactorofintan-giblecapitalandcrisisperiodreturns.ThisstudyemphasizesthepivotalroleofKCandOCasaprotectivebufferagainstexternalshocks,particularlywhenthemarketpaysmoreaFentiontocor-poratesustainability.

Citation:ChaehoChaseLee,

HohyunKim,andErdalAtukeren.2024.TheImpactofKnowledge

CapitalandOrganizationCapitalonStockPerformanceduringEconomic

Crises:TheModeratingRoleof

aGeneralistCEO.JournalofRiskand

FinancialManagement17:192.

hFps:///10.3390/jrfm17050192

AcademicEditor:M.VeyselKaya

Received:26March2024

Revised:30April2024

Accepted:4May2024

Published:7May2024

Copyright:©2024bytheauthors.Li-censeeMDPI,Basel,Swi(erland.Thisarticleisanopenaccessarticledistributedunderthetermsandcon-ditionsoftheCreativeCommonsAt-tribution(CCBY)license(hFps://cre-/licenses/by/4.0/).

Keywords:knowledgecapital;organizationcapital;economiccrisis;stockreturn;generalistCEO;specialistCEO

1.Introduction

Duringeconomiccrises,stockpricesprovideanopportunitytoassessacompany’ssustainablecompetitiveness(Linsetal.2017;Lomeetal.2016;Luetal.2022).Theseeco-nomiccrises,characterizedbyfactorssuchascreditrisks,economiclockdowns,anddis-ruptionsinglobaldemandandtrade,companiesfacesignificantthreatstotheirsustaina-bilitycomparedtonormalperiods(Bekaertetal.2014;Dingetal.2021;Fahlenbrachetal.2021).Unexpecteddeclinesinoverallmarkettrustduringcrisesmakeshareholdersmoreconcernedthatthefinancialinformationpreviouslyrelieduponforinvestmentdecisionsmaynolongerbereliableorvalid.Asaresult,theextenttowhichprofitabilityinformationisreflectedinstockpricesislimited(Linsetal.2017;Yooetal.2021).ResearchershaveutilizedeconomiccrisisperiodsasexperimentalseFingstoinvestigatethedeterminantsofcorporatesustainabilitybasedoninvestors’heightenedinterestinsustainablefirmsduringtheseperiods(Raietal.2021;Suetal.2022).

Consideringthecomplementaryroleoftechnologyandafirm’sinherentcompeti-tivenessalongsidePhysicalCapital(PC),whichistheprimarycomponentofcapitalinmanufacturing,theliteratureonevaluatingthecontributionofICtoacompany’scom-petitivenessandsustainabilityemerges(Alvinoetal.2021;XuandLiu2021).ResearchontraditionalIChaspredominantlyfocusedonresearchanddevelopment(R&D)expensesthatformKC,limitingtheimportanceofotherintangiblefactorssuchashumancapital,

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innovativeproducts,brands,software,customerrelationships,databases,anddistribu-tionsystems.SubsequentstudieshaveexpandedtheconceptofICthroughtheOCbasedonselling,general,andadministrative(SG&A)expenses(Crouzetetal.2022;LevandRa-dhakrishnan2005;Levetal.2009).

OCrepresentsuniquebusinessprocessesandknow-howthataccumulatewithinacompanyandkeytalents,signifyingthecompany’sdistinctivecompetitivenessaFributes,includingenhancedproductivity,innovationcapabilities,brandrecognition,corporatesocialresponsibility,andsustainability(Boubakeretal.2022;Francisetal.2021).Ontheotherhand,KCsignifiesacompany’sabilitytoinnovateproductsandprocesses,formingthefoundationforlong-termcompetitiveadvantageandsustainability(Chiuetal.2021;HegdeandMishra2023).InalignmentwithPetersandTaylor(2017),ourmethodologyforevaluatingafirm’sICinvolvesthesummationofitsKCandOC.Withinthisframe-work,weconstrueexpendituresinR&DasinvestmentsinKC,employingtheperpetualinventorymethodtodeterminethereplacementcostofKC.Similarly,aportionofthehistoricalSG&AisconsideredaninvestmentinOC(EisfeldtandPapanikolaou2013).Wedefineafirm’stotalcapitalascombiningitsPCandIC.

AlthoughthepreviousliteratureidentifiesKCandOCasasignificantcontributortostockreturnsassourcesofacompany’ssustainablecompetitiveness(Francisetal.2021),theirimpactduringcrisisperiodsremainsunexplored.AsavitalcomponentofICrelatedtosustainability,wearguethatKCandOC’sinfluenceonstockreturnsmaybemorepro-nouncedduringcrisesbecauseinvestorsprioritizecompanieswithsustainablecompetitive-nessinvolatileperiods.ThisstudyexaminestherelationshipbetweenICandstockperfor-manceduringtwocrises,specificallytheGlobalFinancialCrisis(GFC)andCOVID-19.

InterestinICincorporatesustainabilityisincreasinglygrowinginfinanceresearch.RemarkablestudiesincludetheintegrationofEnvironmental,Social,andGovernance(ESG)practicesintobusinessstrategies(Clarketal.2015;Wongetal.2021),therecognitionofso-cialcapitalasakeydriverinenhancingcorporateperformanceandinnovation(Linsetal.2017;Liuetal.2021),andtheacknowledgmentofintellectualcapabilitiesasessentialfornavigatingdynamicanddisruptivebusinessenvironments(CohenandKaimenakis2007;Crupietal.2021).WearguethatadeeperunderstandingoftherolesofKCandOCduringeconomiccriseswouldprovideinsightsintohowICsupportscorporatesustainability.Thisresearchprovidesimportantinsightsforstakeholders,includingcorporatemanagersandinvestors,whoseeksustainabilityassessmentsbeyondtraditionalfinancialmetricstoeval-uateacompany’slong-termresilienceandviabilityamidincreasingmarketuncertainty.

Furthermore,ourstudyaimstoexpandtheunderstandingofthecrisisresponseca-pabilitiesofICbyconsideringCEOmanagerialabilityasamoderatingfactor.Priorstud-iessuggestthatICisembeddedinCEOs,indicatingthatacompany’sabilitytomaximizetheutilizationofICisassociatedwithCEOcharacteristics(Crouzetetal.2022).AccordingtoCustódioetal.(2013),CEOscanbeclassifiedasgeneralistsorspecialistsbytheirgeneralmanagerialabilities.GeneralistCEOspossessabroaderrangeofmanagementknowledgeandskills,whilespecialistCEOshavemorefocusedexpertisespecifictoanindustry,firm,ordomain(Chenetal.2021).ThebroadexpertiseofgeneralistCEOscontributestoman-agerialefficiency,astheypossessstrategicdecision-makingskills,fostercorporateinno-vation,handlecomplextasks,andmaintaineffectivecommunicationwithshareholders(Maetal.2021;Xuetal.2021).ThisstudyexamineswhethergeneralistCEOscontributetostockreturnsduringeconomiccrisesbyefficientlyutilizinginternalcapitalbyanalyz-ingmoderatingeffects.

DuringtheearlystagesofaCEO’stenure,ageneralistCEOmayhaveweaklyem-beddedthefirm’sIC,potentiallylimitingtheirabilitytoeffectivelyleveragethecurrentorganization’ssustainablecompetitiveness(LiandPatel2019;Xu2024).Theunderstand-ingandutilizationexperienceofinternalICthatincreaseswithtenurecanenhancethegeneralistCEO’sabilitytoefficientlyleveragethefirm’sKCandOCforproblem-solving.Therefore,weinvestigatewhethertheCEO’stenuremoderatestherelationshipbetweenICandcrisis-periodreturns.

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OurstudyemploysasampleofUSmanufacturingfirmscoveringtheperiodsoftheGFCandCOVID-19crisesandtheiradjacentperiods,from2005to2013and2018to2022,respectively.WefocusonmanufacturingfirmswithStandardIndustrialClassification(SIC)two-digitcodesrangingfrom31to39toensurehomogeneousutilizationstrategiesofICwithinthesample.Manufacturingandnon-manufacturingindustriesmayadoptdifferentR&Dandoperationalstrategies,potentiallyleadingtodifferencesintheaccu-mulationofKCandOCwiththeirimpacts.Thepreviousliteraturehasshown,throughempiricalresearch,thattheeffectofR&Dinvestmentonstockperformancediffersbe-tweenmanufacturingandnon-manufacturingindustries,implyingthattheimpactofICmayvaryacrosssectors(EhieandOlibe2010;RahmanandHowlader2022).

TheempiricalresultsofourstudyrevealthatKCandOCexhibitpositivecorrelationswithcrisis-periodstockreturnsduringboththeGFCandCOVID-19periods,whilePCshowsanegativecorrelation.ThesepaFernspersistevenafterapplyingfirmandyear-fixedeffects.DuringboththeGFCandCOVID-19periods,generalistCEOsstrengthentherelationshipbetweenthetwocomponentsofICandcrisisreturns,whilespecialistCEOsdonotshowsignificantrelationships.AsthetenureofgeneralistCEOsincreases,duringtheGFCperiod,therelationshipbetweenbothcomponentsofICandcrisisreturnsisen-hanced,whileduringtheCOVID-19period,onlytherelationshipbetweenKCandcrisisreturnsisstrengthened.

OurfindingscontributetotheexpandingbodyofresearchconcerningtheinfluenceofIConfirmstockperformance.Priorempiricalinvestigationshaveexploredthesignifi-canceofICinenhancingafirm’soperationalandstock-relatedachievements(Beloetal.2022;Hasanetal.2021).BydisaggregatingICintoKCandOC,ourstudy,evenduringcrisisperiods,providesadeeperunderstandingoftherelationshipbetweenICandstockperformance.Furthermore,thisstudycontributestotherelatedresearchareaasthefirstanalysisofstockreturnsduringeconomiccrises,categorizingICintoKCandOCinthemanufacturingsector.

Furthermore,ourfindingscorroboratepriorresearchregardingtherelationshipbe-tweenCEOgeneralmanagerialabilityandfirmperformance,suchasfinancialresults,acquisitionperformance,investmentpropensity,andcreditratings(Be(eretal.2020;Chenetal.2021;Maetal.2021).WhilethestudybyAndreouetal.(2017)exploredtheroleofgeneralistCEOsduringtimesofuncertainty,theirworkislimitedtoexaminingfirms’investmentbehavioramidstcrises.OurresearchextendsthisareabysheddinglightonhowaCEO’sgeneralmanagerialabilityinfluencestherelationshipbetweenafirm’sICandstockreturnduringthecrisisperiod.

Thesubsequentsectionsofthepaperarestructuredasfollows:Section2delvesintothefoundationaltheoreticalframeworkandhypothesisdevelopment.Section3providesanoverviewoftheempiricalmethodology,encompassingdatasourcesandourvariables.Movingforward,Section4presentstheresultsofouranalysis,examiningtheinfluenceofKCandOConcrisisreturnsandthemoderatingroleofageneralistCEO.Finally,inSec-tion5,wedrawourconclusions.

2.LiteratureReviewandHypothesisDevelopment

ThesignificanceofICinenhancinginnovation,efficiency,andproductivityforsus-tainablecompetitiveadvantagehaslongbeenacknowledgedineconomicsandmanage-ment.Inthe1970sand1980s,therewereeffortsinfirm-levelandneoclassicalgrowthstud-iestoresearchICwithafocusonR&Dinvestment(DziallasandBlind2019;Griliches1979).Subsequently,academicresearchshiftedtowardsconsideringbrandsandnon-R&D-basedICasstrategicassetsthatformacompany’sdistinctivecompetitiveness,par-ticularlywithinmanagementandmarketingliteraturesincethe1990s(Rojas-Lamorenaetal.2022).InterestandsignificanceinfactorswithinICbeyondR&D-basedtechnologicaladvancementsbecameprominentafterthe1990s,wheninformationtechnology-drivenproductivityenhancementstookoff(BrynjolfssonandHiF2000;Corradoetal.2022).Dur-ingthisperiod,significantdisparitiesemergedbetweenthemarketvaluationsof

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companiesandaccountingvaluationsbasedonphysicalassets,realestate,andequipment(Brynjolfssonetal.2002;VanCriekingenetal.2022).ThisphenomenonindirectlysuggestsanexpansioninthecontributionofintangiblecapitalbeyondR&D-basedinvestmenttocorporatevalue.

Thepreviousresearchhasemphasizedthatintangibleassets,includingbrands,newproducts,andsoftwareforcompanyoperations,significantlyinfluencethefinancialper-formanceofthemostinnovativecompaniesintheU.S.beyondR&D-basedinvestment(LevandSougiannis1996).LevandRadhakrishnan(2005)suggestedthatcorporatere-portsshouldincludeassetsfordevelopingnewproducts,services,customerrelationships,humanresources,andorganizationalculture.TheseinsightsandresearchfindingshavepromptedeconomiststoexploreinvestigatingSG&Ainvestmentsasacomplementtotra-ditionalR&D-basedmeasuresofintangiblecapital(Crouzetetal.2022).Asaresult,re-searchonICisexpandedtoencompasstwomainexpensecategories:R&DcostsrelatedtotechnologicaldevelopmentandSG&Acostsrelatedtooperationaleffectivenessandcapabilities(Boiko2022).

RecentstudieshaveexpandedtheconceptofICbyaccumulatingannualexpensesandcategorizingR&D-basedcapitalasKCandSG&A-basedcapitalasOC(PetersandTaylor2017).KCandOCareestimatedbycapitalizingR&DandSG&Ainvestments,re-spectively(Mishra2022).OCincludesstrategy,marketresearch,brandcreationandman-agement,mediamanagement,customeracquisition,salespromotion,customerintelli-genceandrelationship,supplierandpartnershipmanagement,socialnetworks,hiringandtrainingexpenses,managementconsulting,businessprocessexperimentandim-provement,softwaredevelopment,andhumancapital(Gaoetal.2021;Hasanetal.2021).Therefore,OCdiffersfromKC-basedinnovationofproducts,services,andprocesses,en-compassingintrinsicbusinessprocessesandexpertise,whichenablemoreefficientre-sourceutilizationthancompetitors(Crouzetetal.2022).

ExistingstudieshaveconfirmedthatICpositivelycontributestostockvalue(Crouzetetal.2022).Specifically,KCcontributestoacompany’sinnovationcapacityandlong-termsustainability,impactingfirmvalueandreducingstockvolatility(Chiuetal.2021;HegdeandMishra2023).OCpositivelycorrelateswithsustainablecompetitivefactors,includingfirmreputation,socialresponsibilityinvestment,andemployeesatisfaction(Cuietal.2021;Gaoetal.2021).Furthermore,OCenhancesfinancialperformancebasedonefficientresourceutilization,distinctiveoperationalcapabilities,andfirmcompetitiveness,conse-quentlyimprovingstockreturns(Chiuetal.2022;Francisetal.2021).Therefore,KCandOCcontributetoinnovationcapacity,productivity,andefficientresourceutilization,en-hancingthecompany’slong-termsustainability(HegdeandMishra2023;Mishra2022).

TofullyunderstandtheinfluenceofKCandOConafirm’ssustainablecompetitive-ness,itiscrucialtoinvestigatetheirimpactonstockreturnsduringeconomiccrises.Theliteratureoncrisisperiodreturnshashighlightedthesignificanceofsustainability-relatedfactorssuchassocialcapital(Linsetal.2017),ESGpractices(Broadstocketal.2021),andbranding(Huangetal.2021).AssumingthatKCandOCareassociatedwithsustainablecompetitiveness,wearguethatinvestorswouldprefercompanieswithhigherlevelsofKCandOCduringcrisisperiods.

Hypothesis1:FirmswithhigherKCandOCareassociatedwithbeermarketperformancedur-ingacrisis.

ICwithinacompanyisinherentlyembeddedwithinthecompanyitselfanditskeytalents,withCEOsbeingparticularlyscrutinizedasprominentkeytalents(Gaoetal.2021;HasanandUddin2022).ThehumancapitalofaCEOholdssignificantimportanceforacompany’sperformanceduetoitsinfluentialroleindecision-makingprocesses(Chenetal.2021;Garcés-GaldeanoandGarcía-Olaverri2019).CEOs’generalmanagerialabilityisoneofthemajorfactorsinfluencingacompany’sperformance,especiallyinstrategicde-cision-makingandefficientresourceutilization,becausecorporateleadersarerequiredto

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solveawiderangeofproblemsthatrequirediversecareerexperience(LiandPatel2019).Inthiscontext,CEOsareoftenclassifiedaseithergeneralistswithbroadmanagerialknowledgeapplicableacrossindustriesorspecialistswithfocusedexpertiseinspecificsectors(Custódioetal.2013;Xu2024).

ExistingstudiespresentcontrastingviewsontheimpactofgeneralistCEOsoncor-porateperformance.Ontheonehand,theirbroadexpertisecontributestomanagerialef-ficiency.GeneralistCEOsareassociatedwithstrategicdecision-making,fosteringcorpo-rateinnovation,handlingcomplextasks,anddeliveringshareholderbenefits(Be(eretal.2020;Custódioetal.2019).ThesefindingssuggestthatgeneralistCEOsmayadaptbeFertovolatileeconomicconditions.Incontrast,concernsarisethatduetotheirbroadbutpo-tentiallyshallowfirm-specificknowledge,generalistCEOsmayleadtosuboptimalre-sourceutilizationandnegativefirmperformanceduringroutineoperations(Muelleretal.2021).Furthermore,externallyhiredgeneralistCEOsmaybeinducedtotakeexcessiverisks,leadingtosignificantagencyproblems,financialweaknesses,andincreasedvolatil-ityincorporateperformance(GounopoulosandPham2018;Maetal.2021).

Duringcrises,thereisanincreaseddemandforCEOswithdiversemanagerialcapa-bilitiestoimproveorganizationalperformanceinresponsetothechangedmarketenvi-ronment(JebranandChen2022).GeneralistCEOs,capableofaddressingdisparatebusi-nesschallengesthroughvariedprofessionalexperiences,arewell-suitedtonavigateun-certaintiesandcomplexities(Andreouetal.2017;LiandPatel2019).GeneralistCEOswithdiversemanagerialbackgroundsoftenacquireskillsinadaptingfirm-specificresourcestomarketdynamics(GaricanoandRossi-Hansberg2006),nurturinginvestorrelations(MurphyandZabojnik2007),andassistinginfinancialdistressrecovery(Chengetal.2020;GilsonandVetsuypens1993).Ontheotherhand,specialistCEOs,whopossessnarrowerbutdeeperknowledgeandskillscloselytiedtospecificindustries,firms,ordomains,pos-sessproblem-solvingcapabilitiesrelatedtoindustry-andfirm-specificIC(AgnihotriandBhaFacharya2021;Faleyeetal.2018).However,duringeconomiccrises,whennewap-proachestoproblem-solvingarerequired(Andreouetal.2017),theirresourceutilizationcapabilitiesmaynotbeeffectivelyleveraged.Therefore,wehypothesizethatgeneralistCEOscanleverageawiderrangeofstrategiesduringcrisisperiodstooptimizetheutili-zationofKCandOC.

Hypothesis2.AgeneralistCEOpositivelymoderatestheassociationbetweenIC,includingKCandOC,andcrisisperiodreturns.

AspecialistCEO,ascomparedtoageneralistCEO,possessesamorepreciseunder-standingofinternalresourcesandexternalrelationshipsduetotheirlong-termaccumu-latedanddeepunderstandingoforganizationaldomainexpertise(Aldermanetal.2022;GounopoulosandPham2018).Therefore,duringtheearlystagesofaCEO’stenure,ageneralistCEOmayhaveweaklyembeddedthefirm’sIC,potentiallylimitingtheirabilitytoeffectivelyleveragethecurrentorganization’ssustainablecompetitiveness(LengandPan2023).

Asaresult,theextendedtenureofageneralistCEOmayfacilitatetheaccumulationoffirm-specificdomainexpertiseandoperationalcompetencies.Thisaccumulationofknowledgeandexperienceequipsthemwiththetoolstoleveragetheorganization’sre-sourcesforefficientproblem-solving(Brochetetal.2021).Therefore,wehypothesizethatthegeneralistCEO’stenureisamoderator,enhancingtherelationshipbetweenICandstockreturns,particularlyinaneconomiccrisis.

Hypothesis3.WithinfirmsledbyageneralistCEO,theCEO’stenurepositivelymoderatestheassociationbetweenICandcrisisperiodreturns.

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3.DataandMethods

3.1.SampleDefinition

OurmainsampleconsistsoffirmsintheUnitedStatesduringtheGFCandCOVID-19.TheGFCspansfrom15September2008to9March2009,alignedwithLehmanBroth-ers’bankruptcyandconcludingatthenadirsoftheS&P500andMSCIWorldEquityIn-dex(FrankelandSaravelos2012).Oursamplespanspre-crisisandpost-crisisperiods,al-lowingustodiscernICeffectsinnormalandcrisisperiods,specificallyfrom2005to2013,includingfouryearsbeforeandaftertheGFC.FortheCOVID-19period,dataspansfrom19Februaryto23March2020,reflectingthehighestandlowestpointsoftheS&P500indexduringthefirsthalfof2020(Coxetal.2020).TheCOVID-19samplecovers2018to2022,limitedbydataavailabilityinthelatestyear.

WecollectdailystockreturndatafromCRSPandannualaccountingdatafromCOM-PUSTAT.Accountingdataarebasedonthelastyearendingbeforeeachtestingyear.Weexcludedsmall-capstockswithamarketcapitalizationbelowUSD250millionasoftheendofthepreviousyearforboththeGFCandCOVID-19economiccrisesduetotheirlimitedliquidity,widerbid-askspreads,andheightenedsusceptibilitytothepricepres-sureeffectsoftrading.AfterconsolidatingcompaniesusingtheCOMPUSTATandCRSPdatabases,weobtainedthefinalsampleof1105and807firmsmeetingthesecriteriafortheGFCandCOVID-19periods.

3.2.DependentVariables

Thisstudyutilizestwostockreturnvariables:RawReturnandAbnormalReturn.RawReturnisbasedondailyexcessreturnsduringtheestimationperiodforeachcrisisperiodofGFCandCOVID-19.Theseexcessreturnsarecalculatedbysubtractingtherisk-freerate,representedbythe1-monthdailyTreasurybillrate,fromthedailybuy-and-holdreturns.AbnormalReturnmeasuresthedifferencebetweenthefirm’sexpectedreturnandRawReturn.TheexpectedreturniscalculatedusingthemarketmodelwiththeCRSPvalue-weightedindexasthemarketproxy.Weestimatetheexpectedreturnovera60-monthperiod,extendinguntilthedayimmediatelyprecedingthestartoftheRawReturnperiodforeachrespectiveyear.VariabledefinitionsareprovidedinAppendixA.

3.3.MainIndependentVariables:KCandOC

WemeasureKCandOCwiththeperpetualinventorymethodbyfollowingtheap-proachinthepreviousliterature(EisfeldtandPapanikolaou2013;PetersandTaylor2017).ThismeasurementinvolvestheaggregationofdeflatedR&DandSG&Aexpenses,asfor-mulatedinEquations(1)and(2):

KCi,t=KCi,t−1(1−δ0)+

OCi,t=OCi,t−1(1−δ0)+

R&DI,t

CPIt

SG&AI,t

CPIt

(1)

(2)

whereidenotesthefirm,andtrepresentsthefiscalyear.Weadoptadepreciationrate(δ0)of15percent,inlinewiththerateusedbytheU.S.BureauofEconomicAnalysisforesti-matingR&Dcapital.CPItrepresentstheconsumerpriceindex.IncasesofmissingR&DandSG&AexpensedatainCOMPUSTAT,weestimatethesevaluesusingthemethodpro-posedbyPetersandTaylor(2017),whichinvolvesapplyingage-specificgrowthratescat-egorizedbySICtwo-digitindustrialclassifications.

EstimatingtheinitialstockofKCandOCisoftennecessaryduetotheabsenceofaccountingdatainthefoundingyearoffirms.Ourapproach,asoutlinedinEquations(3)and(4),isconsistentwithmethodologiesestablishedinpriorstudies(EisfeldtandPapani-kolaou2013;PetersandTaylor2017):

KCi,t0(3)

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OCi,t0=

SG&Ai,t1

g+δ0

(4)

wheret1indicatesthefirstyearofafirmiappearsinoursample,andgrepresentstheesti-matedgrowthrateofR&DandSG&Aexpensesbeforeitsappearanceinthedataset.Forouranalysis,weusetheaveragegrowthrateofR&DandSG&Aexpensesinourdatasetasg,whichisapproximately10.08percentagepoints.Furthermore,wemeasurethereplacementcostofthePCasthebookvalueofproperty,plant,andequipment(COMPUSTATitemPPEGT).Subsequently,wenormalizeKC,OC,andPCbythefirm’stotalassets.

3.4.GeneralistandSpecialistCEO

WeemploythegeneralistandspecialistCEOcategorizationusingtheGeneralistAbilityIndex(GAI)developedbyCustódioetal.(2013).TheGAIevaluatestheextentofaCEO’shumancapital,drawingfromtheircumulativeworkexperienceinpubliclytradedcompaniesbeforeassumingtheircurrentCEOrole.ACEOwithdiverseexperienceacrossvariousindustries,multiplefirms,differentorganizationalsectors,orpreviousCEOrolesisclassifiedaspossessingbroaderormoregeneralskills.TheGAIdatasetco-versU.S.S&P1500firmsfrom1992to2022,sourcedfromEXECUCOMP.EachCEO’spro-fileismanuallycross-referencedwiththeBoardExdatabasetoobtaincomprehensiveat-tributesencompassingtheirprofessionalhistory.

TheGAIofCEOiinyeartisdefinedas

GAIi,t=0.268X1i,t+0.312X2i,t+0.309X3i,t+0.218X4i,t+0.153X5i,t(

5

)

whereX1representsthecountofdistinctexecutivepositionsheldbyaCEOthroughouttheircareer,X2signifiesthenumberofcompanieswhereaCEOhasbeenemployed,andX3quantifiesthediversityofindustriesatthefour-digitSICcodelevelinwhichaCEOhasgainedexperience.X4isabinaryvariable,takingthevalueof1ifaCEOhaspreviouslyheldaCEOpositionatanothercompany,andX5isanotherbinaryvariable,setto1ifaCEOhasbeenemployedbyamultidivisio