Changing of the Guards: Does Succession Planning Matter?
Publication Date
11-2-2016
Abstract
Using hand-collected data on succession planning disclosures, we study how having a formal succession plan affects the efficiency of CEO turnovers. We find that firms with succession plans have a lower likelihood of forced CEO turnovers and non-CEO executive team resignations. They also experience lower uncertainty around successions and faster learning about the incoming CEO’s ability. Additionally, these firms implement more sophisticated performance evaluation procedures and are less reliant on exogenous factors in making CEO dismissal decisions. These results are not explained by firm-specific attributes and demonstrate that succession planning leads to significant improvements in the efficiency of management turnovers.?
Document Type
Article
Keywords
CEO turnover, succession planning, CEO labor market, CEO ability, performance evaluation
Disciplines
Finance
DOI
10.2139/ssrn.2862653
Source
SMU Cox: Finance (Topic)
Language
English
