Raids, Rewards, and Reputations in the Market for Managerial Talent
C. Edward Fee
Tulane University - A.B. Freeman School of Business
Charles J. Hadlock
Michigan State University - The Eli Broad College of Business and The Eli Broad Graduate School of Management
Review of Financial Studies, Forthcoming
We study the job movements of senior executives across firms. We find that executives who jump to CEO positions at new employers come from firms that exhibit above-average stock price performance. This relationship is more pronounced for more senior executives. No such relationship exists for jumps to non-CEO positions. Stock options and restricted stock do not appear to significantly affect the likelihood of jumping ship, but the existence of an 'heir-apparent' on the management team increases the likelihood that executives will leave for non-CEO positions elsewhere. Hiring grants used to attract managers are correlated with the equity position forfeited at the prior employer and with the prior employer's performance. Implications of these findings for issues related to managerial incentives, managerial retention, and incentive design are discussed.
Keywords: Career concerns, Outside CEOs, Performance measurement, Executive retention
JEL Classification: G32, G34, J33, J41
Date posted: January 15, 2003
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