Although past studies have paid considerable attention to firm reputation, few have investigated the actions firms take following a reputation-damaging event. We identify firms involved in financial earnings restatement and examine whether naming a successor CEO with specific qualities serves to signal the seriousness of a firm's efforts to restore its reputation. Using theories of market signaling, we argue that attributes of successor CEOs significantly influence the reactions of key external constituencies. In particular, firms with more severe restatement tend to name successors who have prior CEO or turnaround experience and more elite education. The naming of such successors results in more positive reactions from the stock market, financial analysts, and mass media. We argue that these attributes communicate to stakeholders and the broader public about the CEO's credibility and the firm's efforts.

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[Correction Notice: An Erratum for this article was reported in Vol 102(4) of (see record 2017-10684-001). The wrong figure files were used. All versions of this article have been corrected.] We investigate a particular aspect of CEO successor trustworthiness that may be critically important after a firm has engaged in financial misconduct. Specifically, drawing on prior research that suggests that facial appearance is one critical way in which trustworthiness is signaled, we argue that leaders who convey integrity, a component of trustworthiness, will be more likely to be selected as successors after financial restatement. We predict that such appointments garner more positive reactions by external observers such as investment analysts and the media because these CEOs are perceived as having greater integrity. In an archival study of firms that have announced financial restatements, we find support for our predictions. These findings have implications for research on CEO succession, leadership selection, facial appearance, and firm misconduct. (PsycINFO Database Record

Research Summary: Why do some boards refuse to take serious action against CEOs who have committed financial misconduct? Past work has directed attention to the antecedents of misconduct while largely overlooking this ques-