Lost in Transition: Generalized Trust and CEO Succession

65 Pages Posted: 16 Jun 2015 Last revised: 1 Nov 2017

See all articles by Alex G.H. Chu

Alex G.H. Chu

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management

Vicki Wei Tang

Georgetown University - Robert Emmett McDonough School of Business

Date Written: October 31, 2017

Abstract

This study identifies two channels through which generalized trust influences CEO succession: the substitution between generalized and personalized trust in selecting the pool of candidates; and the complementarity between generalized and personalized trust in reducing the time for the process. We find that, given the same headquarters location, the proportion of candidates outside the founder’s in-groups increases in generalized trust of the founder’s birthplace, but the length of the succession process decreases in generalized trust. The latter effect is especially salient when the succeeding CEO is outside the founder’s in-groups. The selection channel largely explains the effect of generalized trust on cross-sectional variation in post-succession performance of family CEOs.

Keywords: generalized trust; personalized trust; CEO succession; in-groups; talent pool; culture

JEL Classification: A12; D22; G30; M51; J71

Suggested Citation

Chu, Alex G.H. and Tang, Vicki Wei, Lost in Transition: Generalized Trust and CEO Succession (October 31, 2017). Georgetown McDonough School of Business Research Paper No. 2618349, Available at SSRN: https://ssrn.com/abstract=2618349 or http://dx.doi.org/10.2139/ssrn.2618349

Alex G.H. Chu

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management ( email )

No.535 Fahuazhen Road
Shanghai Jiao Tong University
Shanghai, Shanghai 200052
China

Vicki Wei Tang (Contact Author)

Georgetown University - Robert Emmett McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States

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