Does Lead Time in CEO Succession Matter? Evidence From Planned Versus Unexpected CEO Departures

Mia L. Rivolta

International Journal of Financial Research, 2018, vol. 9, issue 3, 1-19

Abstract: This paper investigates whether and how lead time in CEO succession matters by comparing disruption costs in firms with planned retirements to those with unexpected CEO departures due to death or illness. Using a comprehensive manually-collected dataset of CEO turnovers from 1999 to 2008, I find evidence that firms with planned CEO retirements have significantly longer lead time and lower disruption costs. Specifically, longer lead time is associated with more favorable cumulative stock performance and firm operating performance around the outgoing CEO¡¯s departure. In fact, firms can save approximately $136 million when there is lead time to plan for succession.

Keywords: CEO turnover; CEO succession; board of directors (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:jfr:ijfr11:v:9:y:2018:i:3:p:1-19

DOI: 10.5430/ijfr.v9n3p1

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