CEO Succession: Insiders versus Outsiders

33 Pages Posted: 20 Mar 2000  

Anup Agrawal

University of Alabama - Culverhouse College of Commerce & Business Administration

Charles R. Knoeber

North Carolina State University - Poole College of Management

Theofanis Tsoulouhas

University of California-Merced, School of Social Sciences, Humanities & Arts, The Ernest & Julio Gallo Management Program

Date Written: February 2000

Abstract

Using a data set containing more than 1,000 observations on CEO succession in large U.S. firms over the period 1974-1995, we examine empirically the choice between insiders and outsiders as CEO. We employ a theoretical framework in which firms value both the incentive that the contest to become CEO provides to insiders and the choice of a more able (whether insider or outsider) CEO. This framework predicts that a firm will be more likely to choose an insider to succeed to the CEO position where commonality among inside candidates is greater, where there are more inside candidates, and where the firm's industry is less homogeneous. Employing a novel measure of insider commonality based upon firm organizational structure and Parrino's (1997) measure of industry homogeneity, logistic regressions provide evidence consistent with each of these predictions and offer useful insight into firms' choice between insiders and outsiders as CEO.

JEL Classification: G3, L2, J41

Suggested Citation

Agrawal, Anup and Knoeber, Charles R. and Tsoulouhas, Theofanis, CEO Succession: Insiders versus Outsiders (February 2000). Available at SSRN: https://ssrn.com/abstract=213629 or http://dx.doi.org/10.2139/ssrn.213629

Anup Agrawal (Contact Author)

University of Alabama - Culverhouse College of Commerce & Business Administration ( email )

Culverhouse College of Commerce
EFLS, Box 870224
Tuscaloosa, AL 35487-0224
United States
205-348-8970 (Phone)
205-348-0590 (Fax)

HOME PAGE: http://culverhouse.ua.edu/faculty/profile/4

Charles R. Knoeber

North Carolina State University - Poole College of Management ( email )

Hillsborough Street
Raleigh, NC 27695-8614
United States
919-513-2874 (Phone)
919-515-7873 (Fax)

Theofanis Tsoulouhas

University of California-Merced, School of Social Sciences, Humanities & Arts, The Ernest & Julio Gallo Management Program ( email )

Merced, CA 95343
United States
209-228-4640 (Phone)

HOME PAGE: http://tsoulouhas.info

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