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Worth the wait? Delay in CEO succession after unplanned CEO departures

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  • Rivolta, Mia L.

Abstract

This paper analyzes changes in shareholder value and firm performance in relation to the delay (or lack thereof) in CEO succession. I find that, on average, delay in succession is associated with stronger performance after an unplanned CEO departure. However, the value effect of delay varies and not all firms benefit from long delay. Firms with higher stock price volatility and those whose CEO is hired away experience lower performance. These results suggest that delay affects frictions in the CEO labor market. The impact of delay is particularly important when firms have no succession plan in place.

Suggested Citation

  • Rivolta, Mia L., 2018. "Worth the wait? Delay in CEO succession after unplanned CEO departures," Journal of Corporate Finance, Elsevier, vol. 49(C), pages 225-251.
    • Handle: RePEc:eee:corfin:v:49:y:2018:i:c:p:225-251
    DOI: 10.1016/j.jcorpfin.2017.12.021
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    References listed on IDEAS

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    Cited by:

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    2. Giovanni Ferri & Raffaele Lagravinese & Giuliano Resce, 2021. "Did the COVID-19 Shock Impair the Stock Performance of Companies with Older CEOs?," SERIES 02-2021, Dipartimento di Economia e Finanza - Università degli Studi di Bari "Aldo Moro", revised Jun 2021.
    3. Guthrie, Graeme, 2021. "A dynamic model of managerial entrenchment and the positive incentives it creates," Journal of Economic Dynamics and Control, Elsevier, vol. 123(C).
    4. Mia L. Rivolta, 2018. "Heir to the Throne: Choice of the Replacement CEO After Unexpected CEO Turnovers," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 9(2), pages 172-190, April.
    5. Huang, Haijie & Lee, Edward & Lyu, Changjiang & Zhao, Yiyi, 2020. "Bequest motive, information transparency, and family firm value: A natural experiment," Journal of Corporate Finance, Elsevier, vol. 65(C).

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    More about this item

    Keywords

    CEO turnover; CEO succession; CEO labor market;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions

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