Differential performance impacts of outsider and insider interim CEO successions

Jihun Bae, Jeong Hwan Joo and Chul W. Park

Asia-Pacific Journal of Accounting & Economics, 2022, vol. 29, issue 6, 1439-1468

Abstract: This study finds differential performance impacts of outsider and insider interim CEO successions. Stock markets react incrementally positively to interim CEO successions when the interim CEOs are from outside rather than inside firms. Relative to insider interim CEOs, outsider interim CEOs produce worse earnings performance and greater restructuring charges during their services but lead more frequently to outsider permanent CEO appointments followed by better long-term earnings performance. Our findings suggest that market reactions to interim CEO successions rationally impound the investors’ expectation that outsider relative to insider interim CEO successions will generate greater short-term disruption but pave the way for greater long-term performance improvement.

Date: 2022
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DOI: 10.1080/16081625.2020.1828106

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Asia-Pacific Journal of Accounting & Economics is currently edited by Yin-Wong Cheung, Hong Hwang, Jeong-Bon Kim, Shu-Hsing Li and Suresh Radhakrishnan

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