State Budgetary Outcomes: Do CEO Governors Make a Difference?

ABSTRACT The personal background and traits of top organizational leaders matter for organizational strategies, policymaking, and outcomes. Drawing on upper echelons theory, imprinting theory, and scholarship on managerial decision‐making and the transferability of private‐sector management approaches to the public sector, this study examines the relationship between US governors' top business experience and budgetary outcomes. Competing hypotheses are proposed and tested to assess whether governors with significant business experience enhance or hinder budgetary outcomes. Using a panel dataset of 48 states spanning 1960–2010 and a regression discontinuity design, the analysis finds that electing governors with high‐level business experience leads to improved budget equilibrium during their terms. These findings suggest that governors with business backgrounds are likely to be better able to align revenues with expenditures, thus reducing deviations from the budget. The results are robust across alternative model specifications and offer critical theoretical and practical insights into leadership dynamics and fiscal governance.