CEO Succession Gap and Firm Performance
54 Pages Posted: 27 Jul 2018
Date Written: March 28, 2018
This paper examines the effect of a CEO succession gap on subsequent firm performance. We show that a gap index constructed using differences in CEO attributes between the predecessor and the successor leads to deteriorating subsequent firm performance when the succession event itself is characterized as disruptive. Successors with gaps (i.e., differences from their predecessors) are more likely to make downsizing and business divesting decisions and bring with them a higher proportion of co-opted directors when there is a mandate for change. Overall, our findings suggest that tapping successors who bring in a new set of attributes that are markedly different from their predecessors is not value enhancing under forced succession and poor pre-succession financial performance.
Keywords: CEO Attributes, Succession, Firm Performance
JEL Classification: G30, G32, J62, J63
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