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CEO optimism and the board's choice of successor

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  • Campbell, T. Colin

Abstract

Research suggests that boards of directors select CEOs using signals of ability. However, little is known about how boards determine the combination of attributes that constitute a ‘good’ CEO, especially attributes without an ex ante clear impact on managerial quality, such as CEO optimism. I argue that boards will learn the optimal level of such attributes more quickly from past success, and empirical results support this. Boards, particularly those with high reputation/independence, are significantly more likely to select a moderately optimistic (optimal) successor following a moderately optimistic CEO departure. Robustness checks rule out alternate explanations and support this conclusion.

Suggested Citation

  • Campbell, T. Colin, 2014. "CEO optimism and the board's choice of successor," Journal of Corporate Finance, Elsevier, vol. 29(C), pages 495-510.
    • Handle: RePEc:eee:corfin:v:29:y:2014:i:c:p:495-510
    DOI: 10.1016/j.jcorpfin.2014.10.005
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    Cited by:

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    2. Boulton, Thomas J. & Campbell, T. Colin, 2016. "Managerial confidence and initial public offerings," Journal of Corporate Finance, Elsevier, vol. 37(C), pages 375-392.

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    More about this item

    Keywords

    CEO selection; CEO succession; Optimism; Overconfidence;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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