The Market for CEOs
51 Pages Posted: 9 Jul 2020 Last revised: 28 Jun 2021
Date Written: July 6, 2020
We study the market for CEOs of large publicly-traded US firms, analyze new CEOs’ prior connections to the hiring firm, and explore how hiring choices are determined. Firms are hiring from a surprisingly small pool of candidates. More than 80% of new CEOs are insiders, defined as current or former employees or board members. Boards are already familiar with more than 90% of new CEOs, as they are either insiders or executives who directors have previously worked with. There are few reallocations of CEOs across firms – firms raid CEOs of other firms in only 3% of cases. Pay differences appear too small to explain these hiring choices. The evidence suggests that firm-specific human capital, asymmetric information, and other frictions have first-order effects on the assignment of CEOs to firms.
Keywords: CEO labor markets, CEO-firm matching, assignment models, CEO turnover, CEO compensation
JEL Classification: G30, G34, M12
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