Bringing in Changes: The Effect of New CEOs on Innovation

45 Pages Posted: 29 Sep 2010 Last revised: 19 Jun 2014

See all articles by Frederick L. Bereskin

Frederick L. Bereskin

University of Missouri

Po-Hsuan Hsu

National Tsing Hua University - Department of Quantitative Finance

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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

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

Frederick L. Bereskin (Contact Author)

University of Missouri ( email )

Columbia, MO 65203
United States

Po-Hsuan Hsu

National Tsing Hua University - Department of Quantitative Finance ( email )

101, Section 2, Kuang-Fu Road
Hsinchu, Taiwan 300
China

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