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Internal managerial promotions: Insider incentives and CEO succession

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  • Mobbs, Shawn
  • Raheja, Charu G.
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    Abstract

    We identify and compare firms that promote a single executive (successor-incentive) and companies that conduct tournaments (tournament-incentive) among inside managers to succeed the CEO. Successor-incentive firms give more pay-for-performance compensation to the designated successor, are more likely in firms or industries where firm-specific human capital is more important to the CEO position and where the supply of potential outside CEO replacements is limited. In addition, these firms are associated with lower CEO turnover sensitivity to firm performance. Restricting firms that are suited for a successor-incentive promotion to a tournament-incentive promotion is associated with lower firm valuation.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Corporate Finance.

    Volume (Year): 18 (2012)
    Issue (Month): 5 ()
    Pages: 1337-1353

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    Handle: RePEc:eee:corfin:v:18:y:2012:i:5:p:1337-1353

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    Web page: http://www.elsevier.com/locate/jcorpfin

    Related research

    Keywords: CEO succession; Organization structure; Tournament; Compensation; Firm performance;

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    References

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    Cited by:
    1. Mao, Y., 2013. "Essays on leveraged buyouts," Open Access publications from Tilburg University urn:nbn:nl:ui:12-5929606, Tilburg University.

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