Are Generalists Beneficial to Corporate Shareholders? Evidence from Exogenous Executive Turnovers
72 Pages Posted: 23 Mar 2017 Last revised: 14 Oct 2018
Date Written: March 23, 2017
This study finds a positive, economically meaningful impact of generalist chief executive officers (CEOs) on shareholder value using 164 sudden deaths and 345 non-sudden exogenous turnovers. The higher a departing CEO’s general ability index (GAI), independently and relative to her successor, the lower is the abnormal stock return to turnover announcements. Returns reflect post-turnover changes in operating performance. Further, CEOs’ and successors’ GAIs are significantly positively related, but only for non-sudden turnovers. Consistently, for sudden deaths we find positive stock returns to appointments of generalist successors. The results provide a market-based explanation for the generalist pay premium.
Keywords: executive heterogeneity, managerial work experience, firm value
JEL Classification: G30, G34, J24
Suggested Citation: Suggested Citation