CEO optimism and the board's choice of successor

T. Colin Campbell

Journal of Corporate Finance, 2014, vol. 29, issue C, 495-510

Abstract: Research suggests that boards of directors select CEOs using signals of ability. However, little is known about how boards determine the combination of attributes that constitute a ‘good’ CEO, especially attributes without an ex ante clear impact on managerial quality, such as CEO optimism. I argue that boards will learn the optimal level of such attributes more quickly from past success, and empirical results support this. Boards, particularly those with high reputation/independence, are significantly more likely to select a moderately optimistic (optimal) successor following a moderately optimistic CEO departure. Robustness checks rule out alternate explanations and support this conclusion.

Keywords: CEO selection; CEO succession; Optimism; Overconfidence (search for similar items in EconPapers)
JEL-codes: G34 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:29:y:2014:i:c:p:495-510

DOI: 10.1016/j.jcorpfin.2014.10.005

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