WSJ article touts dubious research

Yves Smith writes on the Naked Capitalism web site that a recent Wall Street Journal article that detailed how CEOs were affected by personal issues is “a travesty” because it doesn’t understand the research behind the study.

Smith wrote, “The centerpiece of the article is a study by Morten Bennedsen, Francisco Pérez-González and Daniel Wolfenzon. Let’s note first that this paper has not yet been published in any recognized academic journal (it’s posted on the University of Texas website, where Francisco Pérez-González is a member of the faculty), so it is not yet clear whether it will be deemed to pass muster in respectable circles.

“The study took the records of 75,000 Danish businesses from 1992 to 2003 and looked at whether events in the CEO’s life affected performance. The chart summarizes some of their findings. The death of child had the greatest negative impact on performance, followed by the death of a spouse. Conversely, the death of a mother in law was a plus.

“Now this study has a certain intuitive appeal. Someone who is grieving might devote less time to his business, or make worse decisions than he would otherwise.

“Nevertheless, correlation is not causation. A study of this sort at most highlights a possible connection.”

Read more here.