CEO Succession: Insiders Versus Outsiders
33 Pages Posted: 20 Mar 2000
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: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Are CEOS Really Paid Like Bureaucrats?
By Brian J. Hall and Jeffrey B. Liebman
-
Are CEOS Really Paid Like Bureaucrats?
By Brian J. Hall and Jeffrey B. Liebman
-
The Other Side of the Tradeoff: The Impact of Risk on Executive Compensation
-
Good Timing: CEO Stock Option Awards and Company News Announcements
-
Good Timing: CEO Stock Option Awards and Company News Announcements
-
The Use of Equity Grants to Manage Optimal Equity Incentive Levels
By John E. Core and Wayne R. Guay
-
The Other Side of the Tradeoff: the Impact of Risk on Executive Compensation
-
Stock Options for Undiversified Executives
By Brian J. Hall and Kevin J. Murphy