The Market for CEOs

47 Pages Posted: 9 Jul 2020

See all articles by Peter Cziraki

Peter Cziraki

University of Toronto - Department of Economics; Tilburg Law and Economics Center (TILEC)

Dirk Jenter

London School of Economics & Political Science (LSE) - Department of Finance; Centre for Economic Policy Research (CEPR)

Date Written: July 6, 2020

Abstract

We study the market for CEOs of large publicly-traded US firms, analyze new CEOs’ prior connections to the firm, and explore how hiring choices are determined. Our results show that firms hire from a surprisingly small pool of candidates. More than 80% of new CEOs are insiders, i.e., current or former employees or board members. More than 90% of new CEOs are executives firms are already familiar with – either insiders or executives its directors have worked with. Firms raid CEOs of other firms in only 3% of cases, implying a lack of talent reallocation across firms. Pay differences appear too small to explain these hiring choices. The evidence is inconsistent with standard frictionless assignment models and suggests that firm-specific human capital and personal connections determine CEO hiring.

Keywords: CEO labor markets, CEO-firm matching, assignment models, CEO turnover, CEO compensation

JEL Classification: G30, G34, M12

Suggested Citation

Cziraki, Peter and Jenter, Dirk, The Market for CEOs (July 6, 2020). Available at SSRN: https://ssrn.com/abstract=3644496 or http://dx.doi.org/10.2139/ssrn.3644496

Peter Cziraki

University of Toronto - Department of Economics ( email )

150 St. George Street
Toronto, Ontario M5S3G7
Canada
+1 416 946 3298 (Phone)

HOME PAGE: http://www.economics.utoronto.ca/petercziraki

Tilburg Law and Economics Center (TILEC) ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

Dirk Jenter (Contact Author)

London School of Economics & Political Science (LSE) - Department of Finance ( email )

United Kingdom

HOME PAGE: http://personal.lse.ac.uk/jenter/

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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