Bringing in Changes: The Effect of New CEOs on Innovation

Bereskin, Fred; Hsu, Po-Hsuan

doi:10.2139/ssrn.1684329

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Bringing in Changes: The Effect of New CEOs on Innovation

45 Pages Posted: 29 Sep 2010 Last revised: 14 Apr 2014

See all articles by Fred Bereskin

Po-Hsuan Hsu

National Tsing Hua University - Department of Quantitative Finance; National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER)

There are 2 versions of this paper

Date Written: April 14, 2014

Abstract

This paper examines the effect of new CEOs on subsequent firm performance from the perspective of innovation. We find that new CEOs are associated with significantly greater quantities and qualities of future innovations, measured with the number of patents, citations, patents per research and development dollar, and citations per patent in the subsequent three-year and five-year periods. New internal CEOs are associated with more and better innovation than new external CEOs. We also find that innovation quantity and quality are positively associated with CEO overconfidence, option compensation, and information asymmetries. These empirical results are robust to controlling for potential endogeneity issues and also remain in a sample of firms that experience the sudden deaths of their CEOs.

Keywords: CEO turnover, innovation

Suggested Citation: Suggested Citation

Bereskin, Frederick L. and Hsu, Po-Hsuan, Bringing in Changes: The Effect of New CEOs on Innovation (April 14, 2014). Available at SSRN: https://ssrn.com/abstract=1684329 or http://dx.doi.org/10.2139/ssrn.1684329