The impact of CEO turnover on firm performance around interim successions
Prior research reports that financial performance of firms that hire interim CEO successors is worse following interim CEO appointments than those that hire permanent successors. We find that this underperformance occurs only following voluntary turnover interim appointments, which represent a small fraction of all voluntary turnovers and roughly a quarter of all interim appointments. We do not observe poor performance when boards hire interim successors following instances of forced departure. Further analysis shows that poor performance during voluntary turnover interim successions are limited to using operating performance measures; market performance is not significantly worse following interim successions. Our results indicate that many interim appointments should not be viewed as value decreasing endeavors and future research on post-succession financial performance should consider the circumstances surrounding the turnover of the predecessor.
KeywordsCEO turnover Interim succession Corporate governance
We thank the editor and 3 anonymous referees for helpful comments. We would also like to thank Robert Parrino for graciously sharing his pre-1996 CEO turnover data. Naoko Fox and Amine Khayati provided excellent research assistance.
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