Interim CEO and Corporate Long-term Investment: Evidence from an Emerging Market

62 Pages Posted: 18 Jan 2018 Last revised: 16 Feb 2020

See all articles by Fei Wu

Fei Wu

Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF)

Jing Yu

The University of Sydney; Financial Research Network (FIRN)

Yujie Zhao

Jiangxi University of Finance and Economics

Donghua Zhou

Jiangxi University of Finance and Economics

Date Written: February 15, 2020

Abstract

Building on the short-term nature of interim CEO contracts, this paper examines the effect of interim CEO appointment on corporate long-term investment measured by a firm’s R&D spending. We find robust evidence that the corporate R&D investment level is significantly lower during the interim CEO appointment period. The negative association between R&D investments and the interim CEO appointment is most pronounced when interim CEOs exhibit a myopic tendency. The primary findings disappear in the subsample of state-owned companies, highlighting the bright side of state ownership in ameliorating managerial myopia. Finally, we document that appointing an interim CEO is costly for shareholders in the short run as well as the long run.

Keywords: Interim CEO; CEO Succession; CEO Turnover; R&D Investment

JEL Classification: G10; G30; M12

Suggested Citation

Wu, Fei and Yu, Jing and Zhao, Yujie and Zhou, Donghua, Interim CEO and Corporate Long-term Investment: Evidence from an Emerging Market (February 15, 2020). Asian Finance Association (AsianFA) 2018 Conference, Available at SSRN: https://ssrn.com/abstract=3104287 or http://dx.doi.org/10.2139/ssrn.3104287

Fei Wu

Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF) ( email )

Shanghai Jiao Tong University
211 West Huaihai Road
Shanghai, 200030
China

Jing Yu (Contact Author)

The University of Sydney ( email )

University of Sydney
Sydney, NSW 2006
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Yujie Zhao

Jiangxi University of Finance and Economics ( email )

South Lushan Road
Nanchang, Jiangxi 330013
China

Donghua Zhou

Jiangxi University of Finance and Economics ( email )

South Lushan Road
Nanchang, Jiangxi 330013
China

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