Who shall succeed? An examination of manager overconfidence and CEO selection
Lin Li () and
Wilson Tong
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Lin Li: Shenzhen University [Shenzhen]
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Abstract:
By categorizing managerial confidence attributes into overconfidence, rationality and diffidence with the methodology used in the finance literature, we investigate how company boards strategically select chief executive officer (CEO) replacements from the senior management pool with different confidence attributes. In normal retirements, company boards tend to select succeeding managers with the same confidence attribute as retiring CEOs. If boards fire company CEOs, they tend to select rational successors irrespective of the confidence attributes of the ousted CEOs. Such board inclination of picking rational successors also occurs when corporate operation is at the recession stage or corporate strategy is changed surrounding succession. The evidence indicates that the managerial confidence attribute is an important consideration of the board in the CEO selection process and that the board deliberately selects the CEO with a certain attribute to move the firm in a planned direction.
Keywords: CEO selection; corporate strategy; operation status; overconfidence; Overconfidence CEO selection Corporate strategy Operation status G3 G34 G39; Overconfidence; Corporate strategy; Operation status G3; G34; G39 (search for similar items in EconPapers)
Date: 2022-11-15
New Economics Papers: this item is included in nep-bec and nep-cfn
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Published in Journal of Business Finance and Accounting, 2022, 49, pp.1736 - 1783. ⟨10.1111/jbfa.12607⟩
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03861065
DOI: 10.1111/jbfa.12607
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