What Determines the Voluntary Disclosure of CEO Succession Planning?

Korean Accounting Review, Forthcoming

47 Pages Posted: 16 Nov 2020

See all articles by Min Kwan Ahn

Min Kwan Ahn

University of Hong Kong

Jeong Hwan Joo

Business Administration School, Ulsan National Institute of Science and Technology; Ulsan National Institute of Science and Technology (UNIST)

Date Written: September 7, 2020

Abstract

An established succession planning program for the identification and grooming of its next leader helps maintain the continuity of firm strategy and leadership style, which influences longterm firm performance and viability. Disclosure of succession planning information may alleviate investors’ doubts about whether the firm has a succession planning plan, while it may increase competition for CEO candidates, leading to increases in the cost of securing qualified candidates. This study explores what determines firms’ decisions to provide this disclosure using firms that initiate CEO succession planning disclosure in a given year and their control firms. We find that firms are more likely to initiate the disclosure of CEO succession planning when 1) segment concentration (negatively related to organizational complexity) becomes lower, 2) the board of directors becomes more independent, 3) the CEO has reached the retirement age of 64, 4) the CEO becomes more important relative to other executive officers in the industry labor market, 5) the number of analysts following (reflecting external monitoring) increases, and 6) CEO tenure (reflecting CEO entrenchment) declines. Overall, our findings suggest that the disclosure of CEO succession planning is motivated by investor demand for a smooth transition among top management and enhanced transparency in CEO succession planning.

Keywords: CEO turnover; Corporate governance; Succession planning; Succession planning disclosure

JEL Classification: G18, G34, M49

Suggested Citation

Ahn, Min Kwan and Joo, Jeong Hwan and Joo, Jeong Hwan, What Determines the Voluntary Disclosure of CEO Succession Planning? (September 7, 2020). Korean Accounting Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3688639 or http://dx.doi.org/10.2139/ssrn.3688639

Min Kwan Ahn

University of Hong Kong ( email )

Pokfulam Road
Hong Kong
China

Jeong Hwan Joo (Contact Author)

Business Administration School, Ulsan National Institute of Science and Technology ( email )

Ulsan, Korea
Korea, Republic of (South Korea)

HOME PAGE: http://jeongjoo.unist.ac.kr/

Ulsan National Institute of Science and Technology (UNIST) ( email )

gil 50
Ulsan, 689-798
Korea, Republic of (South Korea)

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