Outsider CEO succession and firm performance
AbstractWe examine outside CEO succession for 528 firms during the period 1993–2009. Announcement-period returns are positive, but higher for firms hiring from within their industry than from a different industry. However, unlike the year following succession, firms hiring from a different industry display better stock performance in later years. In the 5-year post-succession period dividends, profitability, capital spending and growth potential are also higher for firms hiring from a different industry. Firms with fewer, more independent board members who also sit on other major company boards, or firms in industries with fewer companies are more likely to hire successors whose pay is more aligned to stockholder returns from bigger firms with more business segments and stock return volatility in a different industry. Firms hiring from a different industry pay successors more but grant more incentive pay than firms hiring from the same industry. Our findings suggest that, overall, firms pay more, link compensation more to their subsequent stock performance, and amass more long-term benefits when they hire outside CEO successors from a different industry than their own.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economics and Business.
Volume (Year): 64 (2012)
Issue (Month): 6 ()
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Web page: http://www.elsevier.com/locate/jeconbus
CEO succession; Industry experience; Firm performance;
Find related papers by JEL classification:
- G30 - Financial Economics - - Corporate Finance and Governance - - - General
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
- J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
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