Climbing the Corporate Ladder: Whom Do Highly Skilled CEOs Work For?

73 Pages Posted: 15 Dec 2015 Last revised: 13 Nov 2018

See all articles by Jason D. Kotter

Jason D. Kotter

Brigham Young University - Department of Finance

Yelena Larkin

York University - Schulich School of Business

Date Written: November 1, 2018

Abstract

In this paper, we examine whether inside directors improve the CEO hiring process. Using a novel measure of managerial talent, we show that firms with inside directors hire more talented CEOs. This effect is particularly pronounced when hiring an outside CEO, when inside directors have stronger reputation incentives, and when insiders are likely to have more influence on board decisions. We employ a number of tests to explore the extent to which screening versus shareholder-manager agency problems can explain our results. Overall, our evidence suggests that inside directors play an important screening role in the CEO hiring process.

Keywords: executive directors, inside directors, CEOs, talent, human capital, board of directors

JEL Classification: G30, G34

Suggested Citation

Kotter, Jason D. and Larkin, Yelena, Climbing the Corporate Ladder: Whom Do Highly Skilled CEOs Work For? (November 1, 2018). Available at SSRN: https://ssrn.com/abstract=2703671 or http://dx.doi.org/10.2139/ssrn.2703671

Jason D. Kotter (Contact Author)

Brigham Young University - Department of Finance ( email )

United States

Yelena Larkin

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

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