How do predecessor CEOs on boards affect succession performance?

Abstract

PurposeCorporate governance scholars have long been interested in understanding the impact of former chief executive officers (CEOs) who do not fully leave office but rather remain as board members. Departing from the inconclusive findings of retaining Janus-faced predecessor CEOs on boards, this study revisits the concept of retaining predecessor CEOs on boards (RPCB) and its influence on successors and firm performance under certain conditions.Design/methodology/approachThe study analyzes a sample of 461 Taiwanese firms from 2015 to 2019, adopting the ordinary least squares regression method to examine the correlation between RPCB and firm performance. It specifically analyzes the moderating effects of the complexity of firms' internal and external environments in this context.FindingsThe empirical results show that there is no direct relationship between RPCB and post-succession performance, indicating that this association is shaped by contextual factors. Indeed, the influence of predecessors is more pronounced in situations of high internal and external complexities such that the value of RPCB is situation specific.Originality/valueThis study is the first to generate the resource-based view theory to recognize that the relationship between predecessors on boards and financial consequences is moderated by contextual factors. The authors are the first to extend extant research by considering internal and external complexity in the context of succession and RPCB. In such situations, successors' need for regular mentoring is heightened and the benefits of prior CEO knowledge and resources are more substantial.