CEO succession processes and agency costs

In the 'passing the baton' succession process, the incumbent CEO/Chairman relinquishes the CEO title, but retains the Chairman title to facilitate monitoring the new CEO during a probationary period. The new CEO eventually wins the Chairman title if he is successful during the probationary period. We argue that this type of succession process can lead to managerial conformism and conservatism because reputation concerns give the retiring CEO incentives to pressure the new CEO to continue existing policies and to avoid making major changes that could substantially improve performance or increase firm value. Consistent with this hypothesis, we find no changes in operating performance, abnormal stock returns, or the number of policy decisions the new CEO makes during his probationary period, but significant increases in all of these measures after the probationary period ends. Managerial entrenchment exacerbates succession-securing behavior during the probationary period, while effective monitoring and control mitigate it.

Name thesis:degree_name

Doctor of Philosophy (PhD)

Level thesis:degree_level

Dissertation

Discipline thesis:degree_discipline

Finance and Financial Management

Grantor

Finance (Business Administration)

Year dc:date.available

2005

Author dc:creator

• Altintig, Zeynep Ayca

• agency costs
• corporate governance
• ceo succession
• passing the baton

Statement dc:rights

• unrestricted
• Release the entire work immediately for access worldwide.

Identifier

etd-08192005-152601
https://repository.lsu.edu/gradschool_dissertations/149

OAI identifier oai:identifier

oai:repository.lsu.edu:gradschool_dissertations-1148