Industrial Origin of CEOs in Outside Succession: Board Preference and Stockholder Reaction

摘要

Although scholars have studied outside executive succession for decades, there is still no clear definition of the term "outsider". We focus on a new dimension of outsiderness, the industrial background of executives hired from outside the firm into a CEO position. This paper examines the antecedents of boards' decisions on the industry origin of outside successors as well as the short-term stock market response. We find that firms with more independent boards and with blockholders owning large amounts of stock are more likely to hire industry unrelated successors. However, the board's decision does not strictly follow the rhetoric of stockholder's interests. The stock market reacts more positively to outside CEO succession announcements when the CEO comes from an industry related firm. These findings support our theoretical arguments that the boards of directors may use a logic or rule of appropriateness in deciding the industrial origin of outside successors.