CEO Appointments Research Articles

Rx for Legal Troubles: CEO Medical Degree and Corporate Litigation

ABSTRACTResearch Question/IssueThis study examines the relationship between CEOs' medical degrees (MDs) and corporate litigations targeting US pharmaceutical firms.Research Findings/InsightsCEOs with a medical background are significantly more susceptible to securities class actions, while facing fewer patent lawsuits. The results indicate that the lack of management skills among MD CEOs comes at the cost of firm value. After lawsuit announcements, companies led by MD CEOs experience a significantly negative effect on their stock prices. Markets show no tolerance for failures by MD CEOs, as evidenced by the impact of clinical trial disappointments.Theoretical/Academic ImplicationsThe findings contribute to our understanding of the impact of CEOs' medical backgrounds on corporate litigation outcomes. The results suggest that when examining how a CEO's qualifications affect legal issues and the value of a company, we should consider the unique context of having an MD.Practitioner/Policy ImplicationsPractically, the study implies that firms should carefully consider the balance of managerial and medical expertise in CEO appointments, recognizing the potential legal and financial consequences. Policymakers might see it as beneficial to encourage a mix of different skills among top executives. This could make pharmaceutical companies more resilient in the face of legal issues, which, in turn, helps maintain confidence among investors.

CEO-related announcements, trading activity, and calendar effects

ABSTRACT This study examines how abnormal trading volumes reflect new information, such as CEO-related announcements. Using hand-collected data on 1,236 CEO reappointments and turnovers from Polish firms listed on the Warsaw Stock Exchange, we show that investor reaction to CEO-related announcements is stronger in the winter-spring season than in the summer-fall season. However, in the summer-fall season, CEO reappointment triggers higher trading activity than CEO turnover announcements, while in the winter-spring season, the reaction is opposite. We also discover that abnormal trading volumes induced by CEO-related announcements are significantly lower at the beginning and end of the week than in the middle of the week. Furthermore, when it comes to day of the week anomalies, investors are much less interested in CEO reappointment than in turnover. The findings suggest that calendar effects influence investor reactions to CEO appointments, offering new insights into market anomalies and corporate governance mechanisms.

Drivers for Nominating First Women Executives: Empirical Evidence From Japanese Firms

Prior research on women in executive positions (WiE) has focused exclusively on the consequences of WiE by addressing how women executives influence firm strategy and performance, whereas little is known about the antecedents of WiE. However, to gain a comprehensive understanding of the overall impact of women executives on the firm, it is worthwhile to identify the triggers that prompt firms to appoint women executives for the first time. In this study, we have attempted to identify the antecedents of first appointments of women to executive teams (FAWE). On the basis of a theoretical frame incorporating the think crisis–think female perspective into the punctuated equilibrium model, we consider FAWE as the process of the transformational reform of an organization and examine the roles of three factors—firm performance (i.e., ROA and aspirational performance), environmental changes (i.e., industry dynamism, industry munificence, and industry complexity), and new CEO appointments—as antecedents of FAWE. We conducted a panel logistic regression analysis using 20 years of panel data (2000–2019) for Japanese listed firms. Our findings demonstrate that (1) poor firm performance (ROA and aspirational performance) was significantly related to the likelihood of FAWE in the subsequent year, and (2) a new CEO appointment was significantly related to the likelihood of FAWE in the subsequent year, whereas (3) hypotheses regarding environmental changes (industry dynamism, industry munificence, and industry complexity) were not confirmed. Implications for researchers and practitioners are discussed, along with the study’s limitations and suggestions for future research.

Corruption and insider trading

We investigate firm corruption in China by extracting a measure of corruption from published financial statements and use this to demonstrate that corruption impacts the trading decisions of insiders. Specifically, we show that insiders in firms that are more corrupt trade more aggressively, and they are more willing to trade on their private information as evidenced by the increased informativeness of their trades, in respect of both purchases and sales. This link between firm corruption and trade informativeness is robust to the inclusion of a number of factors that are known to influence the informativeness of such trades, including trade characteristics, insider characteristics and the firm's information environment. We also consider the effect of the appointment of a new CEO or Chair. Overall, corruption related trade informativeness holds consistently for both purchases and sales. Finally, we show that this measure of corruption is robust to the inclusion of several alternative indicators of corporate misconduct.

A Human and Social Capital Perspective on Institutional Owner Reactions to Black CEO Appointments

A Human and Social Capital Perspective on Institutional Owner Reactions to Black CEO Appointments

Influence of gender and age diversity of boards on financial and market performance of banks

This paper seeks to explore the impact of gender and age diversity within the board of directors, as well as the appointment of a female CEO, on the return of assets (ROA) and Tobin Q of banks on a global scale. The study is motivated by the growing interest in how the quality of human capital within boardrooms affects the performance of banks, as well as the conflicting results of previous research on this topic. To conduct the study, panel regressions with fixed effects were employed as the research method. The sample consisted of 470 banks, including 146 banks from emerging markets, and data was collected from 2013 to 2023. The findings revealed that gender diversity within the board had a significant and negative impact on banks’ Tobin’s Q. Additionally, there was no significant relationship found between gender diversity and banks’ ROA, as well as between age diversity and both banks’ ROA and Tobin’s Q. The appointment of a female CEO harmed banks’ Tobin Q in emerging markets, but no significant influence was found on ROA and Tobin Q in banks in the developed world. As a result, it appears that banks’ investors do not view gender diversity as separate from other human capital issues within the boardrooms and may not derive significant financial benefits from gender and age diversity. These findings can be valuable for strategic controlling in evaluating the impact of human capital on the boards and executive branches of financial institutions.

CEO succession and auditor going concern decisions: An analysis of outsider CEOs and generalist skills

This study shows how external CEO succession can mitigate external auditors’ propensity to issue a going concern opinion (GCO) in financially distressed firms, particularly when the outsider CEO possesses higher generalist skills relative to the outgoing CEO. We show that our findings are unlikely to be driven by factors such as pre-succession restructuring, institutional ownership, and board quality that could trigger strategic changes and the appointment of an outsider CEO. Further, we provide evidence to rule out the possibility of our results being influenced by self-selection or omitted variables biases. We also find that the ability of outsider CEOs to mitigate going concern opinions in their appointment year significantly contributes to the subsequent improvements in the financial performance of distressed firms. Further tests on some mechanisms through which new external CEOs can reduce the likelihood of going concern opinions show that firms with such CEO appointees are more likely to reduce dividends and labor costs, issue equity, and reduce product similarity of prospector firms relative to their peers.

A reinvestigation of the stock price reactions to announcements of Black top executive appointments

We investigate the stock market reactions to the announcements of Black CEO and top management team (TMT) appointments in light of two conflicting studies that advance competing and opposite theories. In 2021, Gligor and colleagues theorized that reactions will be negative due to racial stereotyping, and found negative mean stock price reactions for both Black CEOs and TMTs. Conversely, in 2023, Jeong and colleagues theorized that the stock market will respond positively to the appointment of Black CEOs, because these CEOs have to meet a “higher bar” to be appointed. They reported a positive mean reaction to such appointments. In our quasi-replication of these two prior studies, we find a reliably positive mean reaction for Black CEOs but an immaterial median reaction, and no marginal stock price impact to the announcement of the appointment of a Black CEO and TMT executives after controlling for explanatory factors that go outside the racial bias and higher bar theories. In light of the fragility and lack of robustness in these results, we recommend that future research in the area of Black top executives and the stock market be cautious when presenting and interpreting results.

The Economic Impact of Interim CEOs: The Case of Tax Avoidance

ABSTRACT As interim CEO appointments are common in CEO successions, we examine these temporary executives’ economic impact on their firms. Specifically, we explore how interim CEOs affect corporate tax avoidance. We match each “interim CEO firm” (test firms) with a “direct-succession CEO firm” (control firms) and find that test firms report significantly and economically lower tax avoidance. We also find that test firms’ pre-tax earnings are similar to those of control firms, but their after-tax earnings are significantly lower. Further, we find that this lower tax avoidance holds only when interim appointees have low equity compensation, are not named as permanent/successor CEOs, and have no CFO background. Our paper opens the door for future investigation of the economic impact of interim CEOs, which has been under-investigated by prior studies.

Shareholder Activists and Frictions in the CEO Labor Market

ABSTRACT Using hand-collected data on CEO appointments during shareholder activism campaigns, this study examines the relation between activist involvement in CEO recruiting and frictions in CEO hiring decisions. The results indicate that appointments of CEOs who are recruited with shareholder activist influence are associated with more favorable stock market reactions and stronger profitability improvements than appointments without activist involvement. In contrast, I find little evidence that shareholder influence is followed by the recruitment of CEOs who implement myopic corporate policies. Additional analyses reveal positive associations between activist involvement and (1) the amount of resources being dedicated to the CEO search process and (2) the propensity to recruit CEOs from outside the firm. These findings extend the CEO labor market literature, which so far focuses mainly on the decision to remove incumbent CEOs and provides limited insights into CEO recruiting. JEL Classifications: G23; G32; G34; M12; M51.

Do Women Have the Right Skills, Network and Support to Become CEOs?

This study investigates how women board members in listed companies perceive the fit between women’s leadership skills and how the role of CEO in listed companies is defined in the recruitment process. Qualitative in-depth interviews were conducted with 22 women board members, representing all listed companies in Iceland, to obtain an understanding of their experiences regarding support of women candidates and whether they believe estimates of women’s leadership skills contribute to the small number of women holding the position of CEO in a listed company. Data analysis revealed three themes; the first theme concerns networks and their impact on the appointments of CEO; the second deals with support for women seeking CEO positions and the third considers assessment of women’s leadership skills in relation to CEO appointments. The findings provide a new insight into the experience of women board members as regards the assessment of women’s leadership skills and the support to take on the position of CEO in listed companies in Iceland, but only limited research is available about the topic. The findings indicate that when selecting the CEOs of listed companies, it is a matter of importance that the applicant is a member of a male network and complies with masculine stereotypes of leadership styles. The findings suggest that when appointing CEOs of listed companies there is more support for men’s overconfidence than women’s reserved demeanour and men’s overconfidence is perceived as a better fit to how the role of CEO is defined in the recruitment process. The study provides new insights into how these outdated ideas on effective leadership and gender roles impact decisions when CEOs of listed companies are selected with corresponding likelihood of women being overlooked as successful candidates in the selection process.
 Keywords: Gender, effective leadership, CEO recruitment, listed companies, boards, stereotypes.

Gender-based CEO transitions: The role of the Big Three

The Big Three institutional investors have played an increasingly important role in corporate America. This paper investigates whether the Big Three's advocacy for gender diversity extends beyond the board level to the top management. I find that the Big Three ownership is positively associated with firms’ appointment of female CEOs when transitions occur, implying that gender diversity advocacy by index investors has effectively spilled over to top management positions. Interestingly, transitions involving female CEO appointments are positively valued by the market. My findings highlight the Big Three's commitment to tackling diversity-related issues and their ability to steer corporate decision-making.

Hiring Lucky CEOs

Abstract Existing research shows that luck increases CEOs’ pay at their current firm. In this work, we explore how luck affects: (1) CEOs’ employment opportunities and (2) the performance of firms that hire lucky CEOs. Our results indicate that luck increases the likelihood to get a CEO job at new companies. Conditional on moving, lucky CEOs obtain a higher pay (both in absolute terms and relative to new industry peers) mostly due to higher incentive pay. Moreover, lucky CEOs tend to be hired by firms operating in less competitive industries. Despite the higher compensation they receive, the appointment of lucky CEOs is associated with a substantial decline in firm performance. (JEL: G34, D86, J33, M12)

The influence of incoming CEOs

AbstractWe introduce a novel index capturing the power of an incoming CEO and explore the association between the appointment of a new CEO and turnover in the top management team (TMT). We document a statistically and economically significant relation between the level of new CEO power and the departure of senior executives. Specifically, we find that in addition to CEO origin, new CEO power is positively related to TMT turnover. We also find that in the post‐SOX period, CEO power is more significant in affecting TMT turnover and that directorship and ownership of senior executives reduce departure.

How do investors really react to the appointment of Black CEOs?

AbstractResearch SummaryA recent study found that markets react negatively to the appointment of Black CEOs, with an average cumulative abnormal return of −4.2%. The authors argue this is caused by investors invoking racial biases and stereotypes. In contrast, using a comparable sampling period and analytic approach, we find markets react positively to the appointment of Black CEOs with an average abnormal return of +3.1% (or +2.0% after conservatively addressing outliers). Our results are consistent across several alternative analyses, sample adjustments, and robustness tests. We argue racial biases and stereotypes in markets are outweighed by investor appreciation for the higher bar for advancement that Black CEOs face and the exceptional attributes they must exhibit as a result. To conclude, we discuss the implications of our findings.Managerial SummaryA recent study found that markets react negatively (−4.2%) to the appointment of Black CEOs which the authors attribute to racial biases and stereotypes among market participants. If true, boards might be dissuaded from making such appointments out of concern for the firm's stock price and their own shareholdings. Using a comparable sample, we find the opposite with an average return of +3.1% for the appointment of Black CEOs. We argue biases and stereotypes are outweighed by investor appreciation for the higher bar for advancement that Black CEOs face. Specifically, we show Black CEOs are appointed with, on average, more years of education, advanced degrees, and elite education than a comparable group of White CEOs. We share data and code underlying our primary results.

Ensuring commercial readiness in the cellular cancer immunotherapy space

David McCall, Editor, Cell & Gene Therapy Insights, talks to three experts from Gamida Cell’s leadership team – Julian Adams PhD, CEO, Michele Korfin PhD, COO & CCO & Ronit Simantov MD, CMO & CSOJulian Adams joined Gamida Cell’s leadership team as CEO in November 2017, bringing more than 35 years of drug discovery and development experience to his role. Prior to his CEO appointment, Julian served as President and Chief Scientific Officer at Clal Biotechnology Industries (CBI), where he oversaw the Boston office, evaluating investment opportunities and supporting portfolio companies, including Gamida Cell. Before joining CBI, he served as president of research and development at Infinity Pharmaceuticals and as senior vice president of drug discovery and development at Millennium Pharmaceuticals, now part of Takeda Oncology. At Millennium, he played a key role in the discovery of Velcade (bortezomib), a therapy widely used for treatment of multiple myeloma. He was also instrumental at developing an oral inhibitor of phosphoinositide 3-kinase (PI3K), also known as duvelisib. In 2018, the FDA approved COPIKTRA (duvelisib, Verastem, Inc.) for adult patients with relapsed or refractory chronic lymphocytic leukemia (CLL) or small lymphocytic lymphoma (SLL). Earlier in his career, while at Boehringer Ingelheim, he was credited with discovering Viramune (nevirapine) for HIV. He has also worked in research and development leadership roles at LeukoSite and at ProScript. Julian serves as Chairman at Elicio Therapeutics since 2017. He also serves on the Stand Up to Cancer Scientific Advisory Committee, AACR Council of Scientific Advisors, and MGH Center for Cancer Research Scientific Advisory Board.Julian has won several awards for his drug development efforts throughout his career, holds more than 40 patents from the United States Patent and Trademark Office and has authored more than 100 papers and book chapters in peer-reviewed journals. Julian holds a BSc from McGill University and a Ph.D. from the Massachusetts Institute of Technology. He also holds a ScD, honoris causa, from McGill University.Michele Korfin joined Gamida Cell’s leadership team as Chief Operating and Chief Commercial Officer in July 2020. Prior to Gamida Cell, Michele served as Chief Operating Officer at TYME Technologies. From 2016–2018, she was Vice President of Market Access at Kite Pharma, where she oversaw market access strategy, including payer relations, reimbursement and government affairs for YESCARTA®, the first approved CAR-T therapy in lymphoma. She also worked closely with the manufacturing and supply chain teams at Kite to prepare for FDA approval and commercialization. Before joining Kite, Michele spent more than a decade at Celgene in a variety of key strategic and operational roles, including in commercial leadership and oversight of the global development programs for REVLIMID®, a foundation therapy for multiple myeloma and MDS del 5Q. She also led the Celgene oncology sales force of over 120 representatives who were responsible for $650 million in revenue for ABRAXANE®, which is now a standard of care in pancreatic cancer. Michele has also held positions at Merck & Co. as a manufacturing scientist, Bain & Company as a consultant and Schering-Plough in sales and marketing. Michele holds an MBA from Harvard Business School and a BSc in pharmacy from Rutgers University. She is also on the Board of Trustees of BioNJ, the organization that represents the biotechnology industry for New Jersey.Ronit Simantov joined Gamida Cell’s leadership team as Chief Medical Officer in July 2017, bringing more than 20 years of experience in hematology and oncology research, development, registration and product launch. Prior to joining Gamida Cell, Ronit served as Head of Oncology Global Medical Affairs at Pfizer, where she was responsible for multiple programs including Sutent® (sunitinib), Inlyta ® (axitinib), Ibrance® (palbociclib), Bosulif® (bosutinib) and Xalkori ® (crizotinib). Ronit previously led phase 1-3 studies as Vice President of Clinical Research at OSI Pharmaceuticals. She also served as Chief Medical Officer at CuraGen Corporation (acquired by Celldex), where she led development of small molecules and antibody-drug conjugates. At Bayer HealthCare Pharmaceuticals, Ronit led the phase 3 study of Nexavar® (sorafenib) resulting in the first approval of a tyrosine kinase inhibitor in renal cell carcinoma. Prior to joining industry, Ronit spent seven years on the academic faculty at Weill Medical College of Cornell University, where she directed the fellowship program and conducted angiogenesis and vascular biology research. She has authored over 40 peer-reviewed manuscripts.Ronit holds an MD from New York University School of Medicine and a BSc. from Johns Hopkins University. She completed a residency in internal medicine at New York Hospital Cornell Medical Center, and a fellowship in hematology and oncology at Weill Cornell Medicine.

How do Investors Really React to the Appointment of Black CEOs?

A recently published study found that markets react negatively to the appointment of Black CEOs, with an average cumulative abnormal return of -4.21%. The authors argue this is caused by investors invoking racial biases and stereotypes. In contrast, using a comparable sampling period and analytic approach, we find markets react positively to the appointment of Black CEOs with an average abnormal return of +3.1% (or +2.0% after conservatively addressing outliers). Our results are consistent across several alternative analyses, sample adjustments, and robustness tests. We argue racial biases and stereotypes in markets are outweighed by investor appreciation for the higher bar for advancement that Black CEOs face and the exceptional attributes they must exhibit as a result. To conclude, we discuss implications of our findings.

Organizational Characteristics Predicting the Appointment of a Racial Minority CEO

This study examines how nonprofits’ organizational characteristics relate to their likelihood of hiring a CEO of color, focusing on board diversity, revenue streams, risk aversion, and organizational capacity. The analysis of 501(c)(3) organizations with a GuideStar Platinum Seal of Transparency reveals a positive association between the racial diversity of the governing board and the appointment of a minority CEO. The results also show that the likelihood of hiring a CEO of color increases with the number of paid staff, but not with the total expense, partially supporting the organizational capacity hypothesis. Overall, the findings suggest that building a racially diverse board is a key to improving the racial diversity of nonprofit executive leadership.

Do She-EOs Still Experience Gender Bias? Examination of Market Reactions to Female CEO Appointments

We conduct replication and extension of Lee and James (2007) study on market reactions to female CEO appointments. Utilizing the same time period (1990-2000), we replicate the findings of market bias against female CEOs. We then extend the replication to a broader and more recent time period (2000-2019) and find evidence of a negative market reaction to female CEO appointments. Yet, this bias disappears in more recent years suggesting that temporal context serves as an important contingency affecting how investors view female CEO appointments.

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

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.