CEO Succession and TMT Changes – The Role of CEO’s Temporal Depth

Abstract

Why do some new CEOs change their TMT more than others? Prior research has predominantly focused on strategic and performance outcomes of CEO succession, paying little attention to top management team (TMT) changes following succession. We fill this void by shedding light on the quantitative and qualitative nature of TMT changes following CEO succession. Specifically, we examine the role of new CEOs’ temporal depth, a central cognitive feature which captures the temporal distance that individuals consider when thinking about past and future events on changing their TMT. We propose that new CEOs with a longer temporal depth will initiate fewer TMT changes after taking office, and increase their teams’ diversity. Studying CEO appointments in S&P 500 firms between 2004 and 2020, and by applying a novel machine learning approach to measure CEO temporal depth, we find evidence that new CEOs change the TMT in line with their temporal disposition. Our paper contributes to CEO succession research by introducing temporal depth as an important disposition of new CEOs, which influences TMT changes. We also contribute to TMT turnover research by investigating the quantitative and qualitative nature of TMT changes. We enrich research on temporality in strategic management, which has mainly studied the strategic consequences of executives’ temporal dispositions, by shedding light on the role of CEO temporal depth in TMT changes. Finally, we advance methodological approaches in strategic management research by introducing a novel natural language processing approach.