General Revealed Preference Tests of Weak Separability and Utility Maximization with Incomplete Adjustment

Boards hire and fire CEOs based on imperfect information. Using comprehensive data on 28 cohorts in Sweden, we analyze the role of a potentially important unobserved attribute - CEO health - in corporate governance. We find CEOs are significantly healthier than the population and other highskill professionals, in particular in mental health. Health at appointment predicts turnover, suggesting boards respond to health problems and correct mismatches that occurred at the time of appointment. Health-related corporate governance appears to work imperfectly, however, as we find CEO health also associates with firm policies requiring an active CEO role.