New Evidence on Managerial Labor Markets: An Analysis of CEO Retreads

Fee, C. Edward; Hadlock, Charles J.; Pierce, Joshua R.

doi:10.2139/ssrn.2803617

New Evidence on Managerial Labor Markets: An Analysis of CEO Retreads

Journal of Corporate Finance, Forthcoming

40 Pages Posted: 4 Jul 2016 Last revised: 28 Nov 2017

See all articles by C. Edward Fee

C. Edward Fee

Tulane University - A.B. Freeman School of Business

Charles J. Hadlock

Michigan State University - The Eli Broad College of Business and The Eli Broad Graduate School of Management

Joshua R. Pierce

University of Alabama Culverhouse College of Commerce

Date Written: November 24, 2017

Abstract

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

Fee, C. Edward and Hadlock, Charles J. and Pierce, Joshua R., New Evidence on Managerial Labor Markets: An Analysis of CEO Retreads (November 24, 2017). Journal of Corporate Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2803617 or http://dx.doi.org/10.2139/ssrn.2803617