Work

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

Year: 2022

Type: article

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’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.

Source: Journal of Financial Stability

DOI: 10.1016/j.jfs.2022.101072

Authors: Gonul Colak, Eva Liljeblom

Institutions: University of Sussex, Hanken School of Economics, Lund University

Language: English

Topic: Corporate Finance and Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $3,150

OpenAlex ID: W4295012146

FWCI: 5.44

Cites: 100

Cited by: 16

Related to: 10