FORE! An Analysis of CEO Shirking

Is CEO effort important? Using CEO golf play as a measure of leisure, we observe significant variation in the amount of leisure that golfing CEOs consume. CEOs consume more leisure when they have lower equity-based incentives. Consistent with CEO effort being important and some CEOs shirking their firm responsibilities, we find CEOs that golf frequently are associated with firms that have lower operating performance and firm value. The conclusion that CEO shirking leads to lower performance and market valuations is supported by tests controlling for endogeneity. In general, boards are more likely to replace CEOs who shirk, but CEOs with longer tenures or weaker governance environments appear to avoid disciplinary consequences.