CEO Education-Performance Relationship: Evidence from Saudi Arabia

The study investigates the association between CEO education and firm performance with a sample of 85 nonfinancial firms listed on the Saudi stock exchange during 2018 applying ordinary least squares method. CEO education is defined by three variables, the level of education, if the degree-granting institution is domestic or foreign, and if the highest degree is in management or other fields of study. Financial performance is measured by return on assets and return on equity. Firm size, age, liquidity and growth are introduced as control variables. The study shows that 58 CEOs of the firms studied are graduates, 38 have obtained their degree from a domestic institution and 44 have a management degree. Graduate CEOs are found to enhance performance. Graduating from a domestic institution influences performance positively. Management degree of CEO does not seem to impact performance. Firm size, liquidity and growth are positively associated with performance. Firm age does not explain performance differences of firms. Results are robust to performance measures. The findings of the study suggest that firms can benefit from a CEO hiring policy that emphasizes on the minimum qualification set as graduation or higher, education from a domestic institution and no undue weight on management qualification.