Internal managerial promotions: Insider incentives and CEO succession

Shawn Mobbs and Charu G. Raheja

Journal of Corporate Finance, 2012, vol. 18, issue 5, 1337-1353

Abstract: We identify and compare firms that promote a single executive (successor-incentive) and companies that conduct tournaments (tournament-incentive) among inside managers to succeed the CEO. Successor-incentive firms give more pay-for-performance compensation to the designated successor, are more likely in firms or industries where firm-specific human capital is more important to the CEO position and where the supply of potential outside CEO replacements is limited. In addition, these firms are associated with lower CEO turnover sensitivity to firm performance. Restricting firms that are suited for a successor-incentive promotion to a tournament-incentive promotion is associated with lower firm valuation.

Keywords: CEO succession; Organization structure; Tournament; Compensation; Firm performance (search for similar items in EconPapers)
JEL-codes: G30 G32 G34 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:18:y:2012:i:5:p:1337-1353

DOI: 10.1016/j.jcorpfin.2012.09.001

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