What Do Outside CEOs Really Do? Evidence from Plant-Level Data

52 Pages Posted: 30 Jul 2020 Last revised: 10 Oct 2022

See all articles by John (Jianqiu) Bai

John (Jianqiu) Bai

Northeastern University - D’Amore-McKim School of Business

Anahit Mkrtchyan

University of Massachusetts Amherst - Isenberg School of Management

Date Written: October 8, 2022

Abstract

Using rich plant-level data, we analyze the relative performance of firms with inside and outside CEOs. We show that firms with outside CEOs achieve greater productivity improvements compared to firms with inside CEOs. Contrary to conventional wisdom, the relation is stronger in well-performing, rather than poorly performing, firms. Although part of the productivity growth differential comes from divesting low-performing, peripheral, low-tech, and unionized plants, most productivity improvements arise from streamlining continuing plants. Here, productivity is increased by consolidating products, changing the composition of investments toward newer capital, shifting to more capital-intensive production, adopting structured management practices, and improving labor productivity.

Keywords: CEO Succession, Productivity, Corporate Restructuring

JEL Classification: G34

Suggested Citation

Bai, John (Jianqiu) and Mkrtchyan, Anahit, What Do Outside CEOs Really Do? Evidence from Plant-Level Data (October 8, 2022). Available at SSRN: https://ssrn.com/abstract=3663452 or http://dx.doi.org/10.2139/ssrn.3663452

John (Jianqiu) Bai

Northeastern University - D’Amore-McKim School of Business ( email )

360 Huntington Ave.
Boston, MA 02115
United States

Anahit Mkrtchyan (Contact Author)

University of Massachusetts Amherst - Isenberg School of Management ( email )

Amherst, MA 01003-4910
United States

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