Easy cleanups or forbearing improvements: The effect of CEO tenure on successor’s performance

Gonul Colak; Eva Liljeblom

doi:10.1016/j.jfs.2022.101072

Easy cleanups or forbearing improvements: The effect of CEO tenure on successor’s performance

Gonul Colak^*
, Eva Liljeblom

^*Huvudförfattare för detta arbete

Finansiell ekonomi, Helsingfors

Forskningsoutput: Tidskriftsbidrag › Artikel › Vetenskaplig › Peer review

6 Citeringar (Scopus)

Sammanfattning

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.

Originalspråk	Engelska
Artikelnummer	101072
Referentgranskad vetenskaplig tidskrift	Journal of Financial Stability
Volym	63
Antal sidor	20
ISSN	1572-3089
DOI	https://doi.org/10.1016/j.jfs.2022.101072
Status	Publicerad - 23.09.2022
MoE-publikationstyp	A1 Originalartikel i en vetenskaplig tidskrift

FN:s SDG:er

Detta resultat bidrar till följande hållbara utvecklingsmål:

SDG 8 – Anständiga arbetsvillkor och ekonomisk tillväxt

Nyckelord

512 Företagsekonomi

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10.1016/j.jfs.2022.101072Licens: CC BY

Main_Text_Managerial_Tenure_August25_2022Accepterat manuskript (AAM), 177 KBLicens: CC BY-NC-ND
Online Appendix_March12_2022Accepterat manuskript (AAM), 117 KBLicens: CC BY-NC-ND
1-s2.0-S1572308922000936-mainPublicerad version, 850 KBLicens: CC BY

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abstract = "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{\textquoteright}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. ",

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Easy cleanups or forbearing improvements: The effect of CEO tenure on successor’s performance

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