CEO Succession Research Articles

CEO Succession Timing & Post-Succession Firm Performance

CEO succession timing varies significantly across companies. Indeed, CEOs begin their tenures at different times throughout the fiscal and calendar years, regardless of whether appointed CEOs are insiders/outsiders or heir apparents. Despite the variance in CEO succession timing, little is understood regarding this succession aspect, which is problematic as it may explain important variance in post-succession firm performance. To advance research in this regard, we draw from kairology and the fresh start effect and theorize that successions that occur at the beginning of the calendar year, fiscal year, or fiscal quarter are positively related to post-succession performance. We further argue that heir apparent status and insider/outsider status moderate this relationship. We find support for our arguments in the context of S&P 500 firm CEO successions and thus make important contributions to the CEO succession literature.

Conditional Information Asymmetries and Board/CEO Ties in Outsider CEO Successions

The role of directors in CEO succession events has evolved in recent decades with the emergence of the newly created CEO labor market. In this context, directors can potentially assist companies to identify prospective CEOs in the interests of investors or use their expanded role to serve their own and management’s interests. We explore this issue through examining the impact of professional director/CEO relationships in 1,136 outsider CEO successions over the past three decades, spanning a range of institutional environments in developed and developing markets and across a range of company accounting and market-based financial indicators. We find that these relationships can serve both investors’ and management’s interests subject to the specific approach taken to corporate governance in Anglo-American, European, and Asian national institutional environments. Effects also differ across accounting- and market-based measures of financial performance. These findings reflect a previously unexplored conditional theoretical relationship between information asymmetries that affects investors, boards and CEOs. In characterizing the conditional nature of this relationship, this paper makes a unique theoretical contribution to the CEO succession literature’s understanding of the role of information asymmetry and its effect on board/CEO ties in the CEO labor market.

Steering the Intangible Wheel: The Effect of CEOs on Corporate Culture Change

In this study, we provide large-scale empirical evidence that leaders have a substantial impact on corporate culture change. We hypothesize that CEO succession leads to a higher level of corporate culture change, compared with the pre-succession period. In addition, the impact of CEO succession on culture change is contingent on executives’ commitment to the prior culture. Using novel measures of corporate culture based on machine learning, and 765 succession events in S&P 1500 firms from 2001 to 2018, we find an elevated corporate culture change following CEO successions. The effect of succession on culture change is robust in the subsample of predecessor death-driven successions, and stronger if (1) the predecessor does not stay on as board chair and (2) the successor is an outsider. Moreover, we measure corporate culture using both executive comments in earnings conference calls and employee reviews from Glassdoor and find that the culture change patterns are largely consistent across different levels of hierarchies. CEOs manage culture with “style” when they move across companies, and explain a substantial proportion of the variance in overall culture change. Overall, our study contributes to the literatures on strategic leadership and corporate culture by examining whether, when, and to what extent leaders affect corporate culture change.

CEO Succession and Competitive Attacks from Rivals

CEO Succession and Competitive Attacks from Rivals

Family CEO Duality, Temporal Conditions and Research and Development Investment Intensity in Family

Findings on family firms' research and development (R&D) investment intensity remain mixed, with few studies articulating the critical role of a power balance between CEOs and executive boards. In this research, we extend the stewardship and the conservation of resources (COR) theories and posit that family CEO duality (i.e., the family CEO serves as the chairman of the board) negatively relates to a family firm's R&D investment. We further propose that such a relationship depends on two temporal conditions: firm age and CEO succession. We tested our model with a longitudinal dataset comprising 528 public family firms (2008-2016) and found a negative relationship between duality and R&D investment intensity. We also found that firm age mitigates such a negative relationship. That is, an old family firm with duality intensifies R&D more than a young firm. However, a family firm with a dual CEO invests less in R&D in the situation of post-CEO succession than pre-CEO succession.

Temporal Focus, CEO Succession and Firm Performance During an Industry Discontinuity

The replacement of the chief executive starts a new chapter in the history of a firm. To offer a more nuanced understanding of the succession-performance relationship, we introduce CEO temporal focus as an important individual-level contingency. Acknowledging the temporal heterogeneity of outgoing and incoming CEOs, we argue that a shift in CEO temporal focus towards a present-oriented successor promotes adaptation, while keeping disruption at moderate levels. A shift towards a future-oriented successor, however, strengthens disruption, preventing the successor from reaping potential adaptation benefits. Based on a unique sample of private banks in Switzerland and Liechtenstein, we find that a shift towards present focus enhances, whereas a shift towards future focus decreases post-succession performance. Our findings extend the multi-level contingency framework of CEO succession and provide novel insights into the role of subjective temporality during a major industry-level discontinuity.

Extraversion, Charismatic Attribution, and CEO Heir Apparent Promotion

Our study investigates how personal characteristics of CEO heirs apparent influence their likelihood of promotion, either internally at their current firms or externally at other firms. Drawing upon theories and research on Big Five Personality Traits and charismatic leadership, we theorize that more extraverted heirs apparent are more likely to get promoted because they are more likely to receive charismatic attributions, both internally and externally. Using data from a sample of 293 CEO heirs apparent at 240 firms between 2002 and 2015, we found that charismatic attribution mediates the positive relationship between extraversion and heir apparent promotion. By highlighting the importance of the personality trait of extraversion in the context of heir apparent promotion, our theory and supportive results have important implications for research on CEO succession, executive personality, and corporate governance.

Why do Narcissists Become CEOs? An Analysis of Supply and Demand for Narcissistic CEOs

The selection of a new CEO is a decisive event for the future direction of a company and might set it up for success or failure. When selecting a CEO, candidates will be investigated based on multiple criteria such as outsider status and education to achieve the best fit for the company. However, little research has investigated why candidates with specific personality traits such as narcissism get selected. This study investigates the relationship between firm-level, predecessor CEO-level, and market-level factors as antecedents to the selection of a narcissistic CEO. We analyze a sample of 317 CEO successions of 237 companies listed in the S&P500 index between 2007 and 2017. Our results indicate a positive relationship between firm growth, firm size, and predecessor CEO narcissism levels, as well as a weak, negative relationship between predecessor CEO tenure and the narcissism level of the successor CEO. Our findings address the so far little researched domain of antecedents to CEO narcissism and emphasize the effects of firm-level and predecessor CEO-level factors as antecedents to the selection of a narcissistic CEO and consider market turbulence as a moderating effect of these relationships. We also provide practical implications for firm executives and directors.

Corporate Governance, Board/CEO Ties and New Outsider CEO Compensation

The role of company directors in setting new CEO compensation has become more complex in recent times with the creation of a new CEO labor market. Directors can potentially utilize their relationships with prospective CEOs to determine new CEO compensation in the interests of investors. Conversely, new outsider CEOs can potentially be empowered by their relationships with directors to negotiate compensation in their own interests and against that of investors. This study explores this issue through examining the impact of board/CEO ties in 1,173 outsider CEO successions on a range of fixed and short- and long-term, performance-related CEO compensation ratios across a range of developed and developing markets where there are varying approaches to corporate governance. Results show that new outsider CEOs in the United States and other Anglo-American institutional environments are able to leverage their relationships with directors to restructure compensation in their own interests and against those of investors.

New CEOs and Strategic Change:Impacts of outsiderness, regulatory focus, and insider successor type

Despite a consensus that poor pre-succession firm performance triggers new CEOs to make strategic changes following successions, it has been suggested that not all new CEOs in poorly performing firms are equally open-minded about initiating strategic changes. We examine how CEOs’ characteristics and pre-succession firm performance interact to influence whether they maintain the status quo or make changes in strategy after successions. Building on strategic leadership and psychological trait literature, we focus on three dimensions of CEO characteristics: outsiderness, regulatory focus, and insider successor type. The hypotheses are examined by using data of 393 CEO succession events in large US companies for the years from 2005 to 2016. Our findings show that: (1) the negative relationship between pre-succession firm performance and strategic change is strengthened when new CEOs have high degrees of outsiderness; (2) the negative relationship is weakened when new CEOs has a strong prevention focus; and (3) the negative relationship is stronger when insider successors are contenders rather than followers. Overall, the results support our arguments that the familiar dichotomy between insider and outsider is to neglect important differences among both outsiders and insiders. The findings also suggest that CEO prevention focus may serve an indicator of preference for the strategic status quo.

Family Firm CEO Succession and Political Corporate Social Responsibility Involvement

Family Firm CEO Succession and Political Corporate Social Responsibility Involvement

Personality Similarity, Demographic Similarity, and Heir Apparent Promotion

In a relay CEO succession, the heir apparent may exit from the firm when the incumbent CEO are reluctant to relinquish power as initially planned, causing crisis to the firm. This study examines how the personal attributes of the heir and the incumbent can jointly influence the outcome of a relay CEO succession. Specifically, we propose that heir extraversion increases the likelihood of heir promotion by influencing the way an heir is liked and evaluated, especially when the incumbent is also high in extraversion, which can trigger similarity-based interpersonal attraction, thus magnifying the effect of heir extraversion. We further suggest that such a similarity in extraversion plays a more salient role when the incumbent and the heir are demographically different, indicating that personality similarity can to some degree compensate for the lack of demographic similarity in generating mutual like. Our empirical results based on 363 incumbent-heir dyads from publicly listed S&P 1500 companies between 2002 and 2015 provide support for the theoretical arguments.

Does board turnover enhance firm performance? A contingency approach

AbstractResearch Question/IssueDoes board turnover improve future firm performance? Our research investigates whether and when board turnover is beneficial from an information processing perspective.Research Findings/InsightsDrawing from information processing theory, we propose and test a novel model that explains how magnitude of board turnover influences future firm performance, and what pre‐turnover board characteristics mitigate the negative impact of board turnover on future firm performance. We find that board turnover negatively influences future firm performance, and pre‐turnover board meeting frequency, board job‐related diversity, CEO power relative to the board, and board tenure moderate this negative impact.Theoretical/Academic ImplicationsPast findings of the impact of board turnover are limited and equivocal, suggesting the need to conduct more systematic investigation to explain post‐turnover firm performance and to consider boundary conditions that affect this relationship. Building on information processing theory, we explain that the negative impact of board turnover on future firm performance is due to disruption of the board's information elaboration ability. Furthermore, we advance the novel perspective that boards which developed higher information elaboration ability prior to turnover can better mitigate the disruption in information processing resulting from board turnover.Practitioner/Policy ImplicationsThere are costs to board turnover that should be considered seriously. Our study demonstrates that higher magnitude of board turnover leads to poorer subsequent firm performance. The importance of pre‐turnover board's information elaboration ability implies that board turnover should be planned and actively managed—just like CEO succession planning—to minimize information processing disruption from turnover.

Research on Government Regulation of Social Credit System — From the Perspective of Business Ethics

Institution system is an important part of modern social governance. Government, market and social relations within the system, as well as the corresponding institutional arrangements, can be said to be the top priority. Corporate social responsibility is an outstanding case that embodies the relationship and institutional arrangement of the three in practice.Government regulation of social credit system is a good example to analysis it. The research on government regulation of social credit system itself is put forward from the perspective of government, so in the field of government regulation of social credit system, should enterprises play a role? Especially in the era of big data, a large number of data are provided by private enterprises. Without these data, it is difficult to complete the construction of big data system. If enterprises should play their role, what’s the contribution of the government? Academic and industrial circles have been expressing their own opinions on these issues.Therefore, this paper attempts to build a game model among government, enterprise and society to solve the following problems: how to solve the relationship problem among government, enterprise and society? How to build the corresponding system? What’s the corresponding government regulation of China’s social credit system go from the perspective of business ethics?Through the game model analysis, the author finds that shareholders can reduce the threat of CEO replacement and collude with the management staff members to make the cake (including the interests of stakeholders) smaller. But on the basis of the loss of stakeholders’ rights and interests, shareholders’ wealth is increasing, which also explains why more and more senior executives are trying to form collusion with stakeholders in the campaign against antitakeover and loose audit system. Shareholders’ rights and interests and stakeholders’ rights and interests present a seesaw phenomenon. The response of the stakeholders and shareholders to a better corporate governance model is consistent. That is to say, the increase of shareholders’ income is not necessarily based on the loss of stakeholders. The game model also shows that the protection of formal laws and regulations is the main factor to increase the benefits of stakeholders. Through the case of the social credit system, we will conclude that the formal laws and regulations cannot fully ensure the increase of stakeholders’ income, but also need to strengthen the transformation of institutional advantages into governance advantages, and strengthen the law enforcement. It will finally promote the further improvement of social credit system.

Does CEO Succession Planning (Disclosure) Create Shareholder Value?

AbstractAverage cumulative abnormal returns around proxy statements containing “in-depth” disclosures of planning for CEO succession are significantly positive indicating that succession planning is a value-added undertaking. Exploiting a quasi-natural experiment based on a 2009 SEC ruling that induced more succession planning disclosures, we find that succession planning is not value-adding for all firms. Rather, succession planning is value-enhancing for larger, more complex, and more stable firms. Importantly, CEO succession planning appears to be value reducing for smaller, simpler, and less stable firms.

Burma Drinx Group (B) Strategizing for Corporate Governance in a Family Business

Burma Drinx Group (BDG), a large family-owned conglomerate in Myanmar, operates in several industries but has the largest presence in the soft drinks industry, led by its flagship company, Burma Drinx Company (BDC). The case explores the challenges and issues that BDC and BDG are experiencing as a family-owned conglomerate operating in a ‘non-friendly’ business environment, and a turbulent political and economic context. It focuses on an urgent topic, the corporate governance transformation of BDC and BDG. The reader is invited to understand the specificities of BDG’s internal environment and to manage the idiosyncrasies of this family business conglomerate related to its corporate governance system. BDC’s decision-makers face critical challenges for the future and have to completely rebuild the governance system. This current case follows a first case (Degravel & Tun, 2021) titled BDG(A) ‘Strategizing for Succession in a Family Business’, which described and reflected on the process of succession that BDG implemented to successfully replace the former CEO and founder of the company, Aung Win. The current case proposes a consulting-case style where analysis enables the provision of relevant solutions to the top management. Material from the academic literature about corporate governance and change management is offered as a resource. This case continues the story of BDG after its CEO succession.

Experienced CEO and Factor Productivity Improvement: Re‐Examination of Experience Trap

We examine the role of experienced CEO in the CEO succession and their contributions to the performance of focal firms. We utilize the propensity score matching with difference in differences (PSM‐DID) model to evaluate to what extent experienced CEO succession affects the total factor productivity (TFP) growth. Based on the analysis of 1,675 listed manufacturing companies in China, results show that experienced CEO in succession significantly improves firms’ TFP. Our analysis demonstrates that, on average, the event of hiring an experienced CEO succession yields a 3.1% increase in TFP improvement compared with nonsuccession firms. This positive effect can be continued for three years. Furthermore, the heterogeneous effect of experienced CEO succession on TFP is shown between different categories of focal firms (i.e., high‐tech versus low‐tech enterprises).

Grief or Greed: Insider trading around CEO succession

Grief or Greed: Insider trading around CEO succession

What should I do next? CEO succession and Subsequent M&A strategy

What should I do next? CEO succession and Subsequent M&A strategy

CEO Succession Planning and Market Reactions to CEO Turnover Announcements

CEO Succession Planning and Market Reactions to CEO Turnover Announcements