The impact of STEM CEO on investment efficiency: Evidence from Indonesia

Abstract

This research aims to explore the relationship between CEOs with STEM backgrounds and investment efficiency. STEM CEOs, who have graduated in science, technology, engineering, and mathematics fields, are highly valued for their superior technological creativity and innovation. These skills can significantly benefit long-term economic growth. The study uses Ordinary Least Squares (OLS) regression with fixed effects on a sample of 1,006 firm-year observations from non-financial public companies listed on the Indonesia Stock Exchange from 2016 to 2021. The analysis reveals a positive relationship between STEM CEOs and investment efficiency, indicating that the presence of a STEM CEO in corporate governance can enhance investment efficiency. These findings are consistent across our robustness analysis using Coarsened Exact Matching (CEM) and Heckman two-stage regression. Additionally, busy CEOs with STEM backgrounds can optimize their company’s investments efficiently and effectively. They are more experienced in handling stable technologies and can leverage them to plan efficient, long-term investments. By understanding this relationship, companies can gain valuable insights into maximizing investment efficiency by leveraging the expertise and abilities of STEM CEOs.

Keywords

• stem CEO
• CEO background
• investment efficiency
• governance
• left-right brain theory
• Corporate Governance