Just Talk? CEO Succession Plan Disclosure, Corporate Governance and Firm Value

60 Pages Posted: 18 Nov 2016 Last revised: 4 Sep 2018

See all articles by John J. McConnell

John J. McConnell

Purdue University

Qianru Qi

Fudan University; New York University (NYU)

Date Written: February 1, 2016


We present causal evidence of an important yet less explored channel for board of directors to enhance firm value, namely by building, maintaining and disclosing a CEO succession plan. Using a new dataset of 9,084 CEOs and hand-collected information of succession plans, we exploit two regulatory changes and show that better corporate governance instigates firms to disclose succession plans, which causes significantly reduction in the volatility of stock returns, the entrenchment of incumbent CEOs, and the chances of hiring less-qualified successors. Firms with better governance earn positive abnormal returns around the announcement of regulations requesting for more disclosure of CEO succession plans. Firms disclosing succession plans have higher equity returns and experience positive abnormal returns when a new CEO is announced.

Keywords: Disclosure Regulation, CEO Succession Planning, Corporate Governance, Firm Value

JEL Classification: G34, G38, M51

Suggested Citation

McConnell, John J. and Qi, Qianru, Just Talk? CEO Succession Plan Disclosure, Corporate Governance and Firm Value (February 1, 2016). Available at SSRN: https://ssrn.com/abstract=2871628 or http://dx.doi.org/10.2139/ssrn.2871628

John J. McConnell

Purdue University ( email )

403 West State St.
West Lafayette, IN 47907-2056
United States
765-494-5910 (Phone)
765-494-7863 (Fax)

Qianru Qi (Contact Author)

Fudan University ( email )

Beijing West District Baiyun Load 10th
Shanghai, 100045

New York University (NYU) ( email )

Bobst Library, E-resource Acquisitions
20 Cooper Square 3rd Floor
New York, NY 10003-711
United States

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