Does CEO Succession Planning Create Shareholder Value?
55 Pages Posted: 16 May 2018 Last revised: 13 Jun 2018
Date Written: June 4, 2018
Average cumulative abnormal returns around proxy statements containing “in-depth” disclosures of planning for CEO succession are significantly positive indicating that succession planning is a value-added undertaking. Exploiting a quasi-natural experiment based on a 2009 SEC ruling that induced more succession planning disclosures, we find that succession planning is value-enhancing only for larger, older, more complex firms with lower stock return volatility. Analyses of CEO turnover events support the proposition that in-depth disclosure of succession planning is a credible signal of actual planning. Further analyses indicate that succession planning is value-reducing for firms that “should not” plan for CEO succession.
Keywords: CEO succession, CEO turnover, proxy statement disclosures
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