CEO outsiderness and firm performance in an emerging economy: The moderating role of managerial discretion

Abstract

Inconsistent findings from prior research on the performance consequences of new Chief Executive Officer (CEO) origin led us to study the moderating effect of managerial discretion on the link between CEO outsiderness and firms’ post-succession performance. Data from 75 CEO succession events from an emerging economy show that new CEO outsiderness, without managerial discretion context influences, has no direct impact on post-succession performance. Further, our findings emphasise the moderating impacts of managerial discretion, stemming from factors in a company’s external and internal contingencies, which either strengthen or weaken the association between new CEO outsiderness and post-succession firm performance. It is found that market complexity, but not munificence, provides CEOs with more discretion in the Turkish context, thus strengthening the positive associations between CEO origin and firm performance. Firms inertia weakens both managerial discretion level and the association between CEO outsiderness and firm performance. The results show that internal corporate governance also matters. Finally, when a CEO assumes the dual role of both the chairman and the CEO, the link between CEO outsiderness and performance of the firm becomes stronger.

Follow Suit: Imitative governance, resource inclination, and regional innovation efficiency

“…We usually think of the former as having lower managerial inertia and the latter as having higher managerial inertia. Many studies have also shown that managerial inertia can be detrimental to the progress and growth of a company/society (Ataay, 2020;Bel et al, 2018;Mol and Kotabe, 2011;Shen et al, 2022). From the perspective of government managers, we can see that imitative governance has influenced the government's original decision-making to some extent (Kim et al, 2018).…”