Three Essays on CEO Succession

Abstract

This dissertation focuses on how newly appointed CEOs manage their leadership transition process and consists of three empirical essays. Findings from the first essay indicate that newly appointed CEOs could use influence tactics to manage relationship with important organizational constituents. Specifically, ingratiation enhances the new CEO’s social approval based on interpersonal liking and improves the new CEO’s relationship with the predecessor CEO who was retained as the current board chair while self-promotion enhances the new CEO’s social approval based on recognition of competence and reduces shareholders’ misbelief about the new CEO. Findings from the second essay suggest that outside CEOs could communicate their early action plans with important organizational stakeholders to improve their early-stage evaluation. Specifically, I find poor presuccession performance and the dismissal of predecessor CEO will increase the outside CEO’s number of early action plans and the number of the outside CEO’s early action plans will be positively associated with postsuccession analyst recommendation change. In addition, the outside CEO’s prior advantageous work experience (prior intra-industry experience, prior CEO experience and prior experience in “CEO factories”) will strengthen the positive relationship between the number of the outside CEO’s early action plans and postsuccession analyst recommendation change. Findings from the third essay suggest firms experience negative stock market reaction when they dismiss newly appointed CEOs while their rival firms experience positive stock market reaction to the same dismissal. In addition, rival firms that are in closer amount of sales revenue, and/or have more geographic market overlap and/or have more analyst coverage overlap will experience a more positive stock market reaction.