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Cvijanović, Dragana, Gantchev, Nickolay and Li, Rachel (2023) CEO succession roulette. Management Science, 69 (10). pp. 5794-5815. doi:10.1287/mnsc.2022.4572 ISSN 0025-1909.
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Official URL: http://dx.doi.org/10.1287/mnsc.2022.4572
Abstract
Despite intense scrutiny from investors, markets, and regulators, many public companies have no formal succession plans. Anecdotal evidence links succession risk to significant value destruction, but there is limited academic research evaluating the effects of succession planning on chief executive officer (CEO) turnover outcomes. We provide evidence that succession planning reduces the cost of management transitions by improving their efficiency. Firms with succession plans experience not only lower uncertainty around turnover events but also a faster reduction in uncertainty over the incoming CEO’s tenure, consistent with faster learning about CEO-firm fit. Succession planning also raises the quality of the CEO-firm match, as evidenced by longer CEO tenure, and improves the board’s readiness to replace an underperforming CEO, increasing turnover performance sensitivity.
Item Type: | Journal Article | ||||||||
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Divisions: | Faculty of Social Sciences > Warwick Business School > Finance Group Faculty of Social Sciences > Warwick Business School |
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Journal or Publication Title: | Management Science | ||||||||
Publisher: | Institute for Operations Research and the Management Sciences (I N F O R M S) | ||||||||
ISSN: | 0025-1909 | ||||||||
Official Date: | October 2023 | ||||||||
Dates: |
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Volume: | 69 | ||||||||
Number: | 10 | ||||||||
Page Range: | pp. 5794-5815 | ||||||||
DOI: | 10.1287/mnsc.2022.4572 | ||||||||
Status: | Peer Reviewed | ||||||||
Publication Status: | Published | ||||||||
Access rights to Published version: | Restricted or Subscription Access | ||||||||
Date of first compliant deposit: | 14 November 2022 | ||||||||
Date of first compliant Open Access: | 14 November 2022 | ||||||||
Open Access Version: |
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