CEO Succession Roulette

Publication Date

11-2-2016

Abstract

This paper studies the effects of succession planning on management turnover using hand-collected data on succession planning practices at U.S. public firms. Our tests highlight three dimensions in which succession planning impacts CEO turnover. Firms with succession plans (i) experience lower uncertainty around successions and faster learning about CEO ability, (ii) rely primarily on firm-specific information in CEO dismissals, and (iii) use more sophisticated performance metrics in evaluating their executives. Our findings are robust to the effects of firm and industry characteristics, and indicate that succession planning improves the efficiency and lowers the cost of management transitions.

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

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