Transferable Skills vs. Homecourt Advantage: A Comparison of Real Asset Performance by Externally and Internally Hired CEOs

60 Pages Posted: 11 Nov 2007 Last revised: 2 Aug 2018

See all articles by James S. Ang

James S. Ang

Florida State University; Florida State University - College of Law

Gregory Leo Nagel

Middle Tennessee State University

Date Written: November 9, 2007

Abstract

Overall, we find that CEOs appointed from inside the firms deliver greater cumulative and more persistent performance than those hired from outside the firms. We attribute this to insiders having a home court advantage, from years of accumulated firm-specific experience. This advantage is rarely transferable, as their persistent superior performance is rarely repeated in another firm. The size of this advantage could be large, as we find the performance of the insiders to be no worse, often better, than outsiders even when we isolate situations in which firms are distressed, insiders are disadvantaged, and outsiders are empowered. Our evidence fails to support the notion that general skills are increasingly more valuable, and the shortage of CEOs with these skills causes the observed rise in CEO pay.

Keywords: CEO, Performance, Turnover, Firm specific skills, general skills, labor market

JEL Classification: G30, G32, G34

Suggested Citation

Ang, James S. and Nagel, Gregory Leo, Transferable Skills vs. Homecourt Advantage: A Comparison of Real Asset Performance by Externally and Internally Hired CEOs (November 9, 2007). Available at SSRN: https://ssrn.com/abstract=1028714 or http://dx.doi.org/10.2139/ssrn.1028714

James S. Ang

Florida State University ( email )

College of Business
Tallahassee, FL 32306-1042
United States
904-644-8208 (Phone)

Florida State University - College of Law ( email )

425 W. Jefferson Street
Tallahassee, FL 32306
United States

Gregory Leo Nagel (Contact Author)

Middle Tennessee State University ( email )

P.O. Box 50
Murfreesboro, TN 37132
United States

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