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

University of Calgary

Date Written: June 6, 2017


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: or

Udi Hoitash (Contact Author)

Northeastern University - Accounting Group ( email )

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

Anahit Mkrtchyan

University of Calgary ( email )

University Drive
Calgary, Alberta T2N 1N4

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