The Market for CEOs
47 Pages Posted: 9 Jul 2020
Date Written: July 6, 2020
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
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