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CEO identity and labor contracts: Evidence from CEO transitions

Listed author(s):
  • Bach, Laurent
  • Serrano-Velarde, Nicolas

This paper assesses how CEO transitions shape labor contracts within firms. We argue that family links between a new CEO and his predecessor act as a commitment device for upholding implicit contracts with the workforce. Consistent with this view, we find evidence of a wage insurance mechanism during a CEO transition. Dynastically-promoted CEOs relative to external CEOs are associated with up to 25% less job separations and 20% lower wage growth. Crucially, we show that differences, in terms of job separations, between dynastic and non-dynastic CEO successions are significantly greater when labor markets are more frictional.

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File URL: http://www.sciencedirect.com/science/article/pii/S0929119915000103
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Article provided by Elsevier in its journal Journal of Corporate Finance.

Volume (Year): 33 (2015)
Issue (Month): C ()
Pages: 227-242

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Handle: RePEc:eee:corfin:v:33:y:2015:i:c:p:227-242
DOI: 10.1016/j.jcorpfin.2015.01.009
Contact details of provider: Web page: http://www.elsevier.com/locate/jcorpfin

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  8. Andrew Ellul & Marco Pagano & Fabiano Schivardi, 2014. "Employment and Wage Insurance within Firms - Worldwide Evidence," EIEF Working Papers Series 1402, Einaudi Institute for Economics and Finance (EIEF), revised Sep 2017.
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  11. John M. Abowd & Francis Kramarz & David N. Margolis, 1999. "High Wage Workers and High Wage Firms," Econometrica, Econometric Society, vol. 67(2), pages 251-334, March.
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