Bringing in Changes: The Effect of New CEOs on Innovation

45 Pages Posted: 14 Oct 2011 Last revised: 19 Jun 2014

See all articles by Frederick L. Bereskin

Frederick L. Bereskin

University of Missouri

Po-Hsuan Hsu

National Chiao-Tung University - Institute of Management and Technology

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Date Written: October 24, 2013

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: Innovation, CEO turnover, Corporate governance

Suggested Citation

Bereskin, Frederick L. and Hsu, Po-Hsuan, Bringing in Changes: The Effect of New CEOs on Innovation (October 24, 2013). Paris December 2011 Finance Meeting EUROFIDAI - AFFI, Available at SSRN: https://ssrn.com/abstract=1944047 or http://dx.doi.org/10.2139/ssrn.1944047

Frederick L. Bereskin (Contact Author)

University of Missouri ( email )

Columbia, MO 65203
United States

Po-Hsuan Hsu

National Chiao-Tung University - Institute of Management and Technology ( email )

East District
Hsinchu 300
Taiwan

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