TY - JOUR
T1 - Easy cleanups or forbearing improvements
T2 - The effect of CEO tenure on successor’s performance
AU - Colak, Gonul
AU - Liljeblom, Eva
N1 - Publisher Copyright:
© 2022 The Authors
PY - 2022/9/23
Y1 - 2022/9/23
N2 - Long CEO tenure can harm firm performance even after the CEO is replaced. We analyze this issue by conditioning post-turnover firm performance on the length of the preceding CEO’s tenure. Identification comes from instrumenting sudden CEO deaths as an exogenous shock to tenure length. We find that when a successor takes over after a long-tenured CEO, operating performance and stock returns are significantly lower, restructuring costs are higher, “big baths” are larger, and firm recovery is slower. Weaker corporate governance and a long-tenured CEO with lower skills amplify these post-turnover effects.
AB - Long CEO tenure can harm firm performance even after the CEO is replaced. We analyze this issue by conditioning post-turnover firm performance on the length of the preceding CEO’s tenure. Identification comes from instrumenting sudden CEO deaths as an exogenous shock to tenure length. We find that when a successor takes over after a long-tenured CEO, operating performance and stock returns are significantly lower, restructuring costs are higher, “big baths” are larger, and firm recovery is slower. Weaker corporate governance and a long-tenured CEO with lower skills amplify these post-turnover effects.
KW - 512 Business and Management
KW - Corporate Governance
KW - Managerial tenure
KW - CEO tenure
KW - CEO term limits
KW - restructuring costs
KW - shareholder value
KW - firm performance
KW - hazard model
UR - https://www.mendeley.com/catalogue/82db3fd5-218f-34cf-81fe-38bed5639de6/
UR - http://www.scopus.com/inward/record.url?scp=85138352755&partnerID=8YFLogxK
U2 - 10.1016/j.jfs.2022.101072
DO - 10.1016/j.jfs.2022.101072
M3 - Article
SN - 1572-3089
VL - 63
JO - Journal of Financial Stability
JF - Journal of Financial Stability
M1 - 101072
ER -