Bridging the Gap: Evidence from Externally Hired CEOs

81 Pages Posted: 23 Jan 2018

See all articles by Yonca Ertimur

Yonca Ertimur

University of Colorado at Boulder - Department of Accounting

Caleb Rawson

University of Arkansas - Department of Accounting

Jonathan L. Rogers

University of Colorado at Boulder - Leeds School of Business

Sarah L. C. Zechman

University of Colorado at Boulder - Leeds School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: January 12, 2018

Abstract

We investigate executive employment gaps (hereafter, gaps) between the appointment of an external CEO at a public firm and the individual’s prior executive position at a public company. These gaps cannot be reliably obtained from common databases. We hand collect data for externally hired CEOs at public companies from 1992-2014. These CEOs represent approximately 40% of the 5,095 CEO successions and have a mean gap of 1.9 years. The gap increases to 3.2 years for the subset of new hires with a gap. We hypothesize that labor market frictions and executive skillsets contribute to the existence and length of these gaps. Using theories from labor economics, we predict (equilibrium) associations between two measures of “fit” (executive compensation and long-term match quality) and gaps (both existence and length). Finally, we provide descriptive evidence on what executives do (e.g., sit on boards, work for private consulting companies, or consume leisure) during their gaps. This project was subject to and published through a registered report process. Any tests that were not included in the accepted proposal are marked as unplanned analyses.

Keywords: Corporate Governance, CEO Compensation, CEO Turnover, Employment Gaps

JEL Classification: J64, M12, M40, M41

Suggested Citation

Ertimur, Yonca and Rawson, Caleb and Rogers, Jonathan L. and Zechman, Sarah L. C., Bridging the Gap: Evidence from Externally Hired CEOs (January 12, 2018). Available at SSRN: https://ssrn.com/abstract=3101154 or http://dx.doi.org/10.2139/ssrn.3101154

Yonca Ertimur

University of Colorado at Boulder - Department of Accounting ( email )

419 UCB
Boulder, CO 80309-0419
United States

Caleb Rawson (Contact Author)

University of Arkansas - Department of Accounting ( email )

Business Bldg. 454
Fayetteville, AR 72701
United States

Jonathan L. Rogers

University of Colorado at Boulder - Leeds School of Business ( email )

419 UCB
Boulder, CO 80309-0419
United States

Sarah L. C. Zechman

University of Colorado at Boulder - Leeds School of Business ( email )

Boulder, CO 80309-0419
United States

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