Recruiting the CEO from the Board: Determinants and Consequences

54 Pages Posted: 24 Jun 2015 Last revised: 8 Aug 2017

See all articles by Udi Hoitash

Udi Hoitash

Northeastern University - Accounting Group

Anahit Mkrtchyan

Northeastern University - D’Amore-McKim School of Business

Date Written: June 6, 2017

Abstract

We investigate an increasingly prevalent CEO succession strategy: recruiting CEOs from the board of directors (director-CEOs). Director-CEOs might be hired in a planned succession because they combine outsiders’ new perspectives with insiders’ firm-specific knowledge. Alternatively, directors may be recruited when the board is unprepared for a leadership change. We find that unplanned successions, in which director-CEOs are appointed as a “quick-fix” solution, result in a negative market reaction, deterioration in performance, and ill-fitting candidates with shorter tenures. Conversely, firms recruiting director-CEOs in planned successions perform similarly to other firms. We find no evidence that poor firm quality drives these results.

Keywords: CEO Succession, Independent Directors, Firm Performance

JEL Classification: G34

Suggested Citation

Hoitash, Udi and Mkrtchyan, Anahit, Recruiting the CEO from the Board: Determinants and Consequences (June 6, 2017). Journal of Financial and Quantitative Analysis (JFQA), Forthcoming. Available at SSRN: https://ssrn.com/abstract=2621615 or http://dx.doi.org/10.2139/ssrn.2621615

Udi Hoitash (Contact Author)

Northeastern University - Accounting Group ( email )

360 Huntington Ave.
Boston, MA 02115
United States
671-373-5839 (Phone)

Anahit Mkrtchyan

Northeastern University - D’Amore-McKim School of Business ( email )

360 Huntington Ave.
Boston, MA 02115
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
187
rank
158,770
Abstract Views
995
PlumX Metrics
!

Under construction: SSRN citations will be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information