A Game of Thrones – Dynamics of Internal CEO Succession and Outcome

European Financial Management

51 Pages Posted: 25 Mar 2017 Last revised: 13 May 2021

See all articles by Brian Blank

Brian Blank

Mississippi State University

Brandy Hadley

Appalachian State University - Finance, Banking & Insurance

Kristina Minnick

Bentley University

Mia L. Rivolta

Xavier University

Date Written: May 13, 2021

Abstract

We examine the dynamics of firms’ internal succession methods and find that horse race successions are common among the largest U.S. firms. Although heir and horse race CEO candidates are of similar quality, the consequences of these two succession methods differ significantly. We show that horse race successions induce conflict and are detrimental to the firm but not to the newly appointed CEOs. Our findings suggest firm’s succession methods influence the CEO labor market, CEO compensation, and firm performance. These findings highlight the importance of CEO succession planning in the form of grooming an heir.

Keywords: CEO Turnover; Executive Compensation; Tournaments; Board of Directors

JEL Classification: G30; J33; M52

Suggested Citation

Blank II, Douglas Brian and Hadley, Brandy and Minnick, Kristina and Rivolta, Mia L., A Game of Thrones – Dynamics of Internal CEO Succession and Outcome (May 13, 2021). European Financial Management, Available at SSRN: https://ssrn.com/abstract=2938009 or http://dx.doi.org/10.2139/ssrn.2938009

Douglas Brian Blank II

Mississippi State University ( email )

Mississippi State, MS 39762
United States
(662) 325-5910 (Phone)

Brandy Hadley

Appalachian State University - Finance, Banking & Insurance ( email )

Boone, NC 28608
United States

Kristina Minnick (Contact Author)

Bentley University ( email )

175 Forest Street
Waltham, MA 02154
United States

HOME PAGE: http://sites.google.com/view/kminnick/home

Mia L. Rivolta

Xavier University ( email )

3800 Victory Pkwy
Cincinnati, OH 45207
United States

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