New Evidence on Managerial Labor Markets: An Analysis of CEO Retreads
40 Pages Posted: 4 Jul 2016 Last revised: 28 Nov 2017
Date Written: November 24, 2017
We examine career outcomes of CEOs subsequent to turnover. CEOs often resurface after turnover, but they secure positions that are inferior to their prior posts. Success in the retread market is unrelated to prior employer performance and board composition. CEOs who were particularly attached to their prior employer tend to have the poorest subsequent job prospects. These results suggest a generally efficient CEO turnover process in which firms dismiss CEOs of low ability. As CEOs acquire specific human capital over time, their outside options and bargaining power appear to diminish, offering a potential explanation for the specialist CEO compensation discount.
Keywords: CEO turnover, external labor markets, CEO incentives, managerial ability, retreads
JEL Classification: G30, G31, G32
Suggested Citation: Suggested Citation