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

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

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

C. Edward Fee (Contact Author)

Tulane University - A.B. Freeman School of Business ( email )

7 McAlister Drive
New Orleans, LA 70118
United States

Charles J. Hadlock

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

315 Eppley Center
East Lansing, MI 48824-1121
United States
517-353-9330 (Phone)
517-432-1080 (Fax)

Joshua R. Pierce

University of Alabama Culverhouse College of Commerce ( email )

101 Paul W. Bryant Dr.
Box 870382
Tuscaloosa, AL 35487
United States

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