September 22, 2014

Running a company well just might start with, well, running.     Photo: Fuse/ThinkStock

Study: Runners Run Better Companies

Marathon-racing CEOs linked to more valuable firms

A German study found that CEOs who run marathons are more likely to run companies with higher firm values. The results, published this month in a working paper in the Social Science Research Network, show that marathon-running CEOs helm companies valued between 4 percent and 10 percent higher than those of nonrunning CEOs, providing what researchers believe is rationale for using physical fitness as a hiring requirement for CEOs.

The study is likely to further the growing interest among professionals to stay extremely fit.

Researchers Peter Limbach and Florian Sonnenburg, financial experts from Karlsruhe Institute of Technology and the University of Cologne, respectively, hypothesized that CEOs who exercise are presumably healthier and less stressed, which would lead to better corporate performance. 

To test their hypothesis, the researchers cross-referenced firm values of companies on the S&P 1500 index and CEO fitness. A fit CEO was defined as one who had finished one or more of the country’s 15 biggest marathons between 2001 and 2011. According to Limbach and Sonnenburg, marathon running is a good indicator of executive fitness as it “is a primary sport for people who travel a lot, have changing schedules, a high need for flexibility, and considerable workload,” and training can be done anywhere with little equipment.

After reviewing more than 2.5 million race finishes, the researchers identified 9,549 finishes by 2,694 CEOs. Limbach and Sonnenburg found that fit CEOs manage companies that on average have firm values of almost 5 percent higher. The correlation was even stronger in specific subsets of corporate honchos: those executives of above-median age (55), tenure, and workload. As executives age, spend more time in their positions, and take on more responsibility, firm values of marathon-running CEOs clocked in 8 percent to 10 percent higher than average. These CEOs also achieve better outcomes in high-profile mergers and acquisitions.

The researchers say their results held true even after controlling for CEO heterogeneity (the tendency of race-running executives to be more talented, athletic, and disciplined overall), past job performance, and other variables. Still, while corporate governance experts like Stanford professor David Larcker praise the research, he cautions how much we can depend on correlation as explanation.

“[CEO fitness and firm value] seem to be associated, but it is pushing things to make causal statements like if an out-of-shape CEO was replaced by a fit CEO, would you believe that firm value would automatically increase?” Larcker, who frequently surveys executives about business habits, told Outside in an email, “It may well be that fit CEOs are drawn to firms that are likely to have future value increases, and out-of-shape CEOs only get hired by companies on the way down.”

Marathon-running CEOs like T-Mobile’s John Legere, on the other hand, have been quick to promote the study.

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