A recent article in USA Today purports to show that on average, companies whose founders remain at the helm, outperform the S&P 500 972% versus 222% over the past 15 years.
While they don't go into the minutiae of their methodology, it appears they took a database of S&P 1500 stocks provided by an Ohio State professor, and found 63 that are still run by their founders. They then compute the return versus the S&P 500 over that period.
If this is in fact the methodology(and there is no reason to believe otherwise) it is one of the worst cases of survivorship bias that I have seen. There is absolutely no mention of the presumably numerous founder led companies at the beginning of the sample period, who either ran their companies into bankruptcy (Global Crossing anyone?), or were forcibly removed after a long tenure of underperformance.
As an indicator to prospective investment this type of article useless and possibly even worse than useless. One would hope that most professional investors and lay statisticians would recognize the errors of "pseudo studies" such as this right off. Unfortunately the message is likely to resonate with those who can least afford it.
