Successor CEO Functional And Educational Backgrounds: Influence Of Predecessor Characteristics And Performance Antecedents

Abstract

This study seeks to examine if boards consider CEO educational and functional background when choosing a new CEO. It also examines which factors determine whether the board of directors will seek an incoming CEO with a different educational and/or functional background from that of the current CEO. Using a sample of 832 successions between 1992 and 2009, we found that the outgoing CEO characteristics and the firm characteristics influence the selection of the incoming CEO functional backgrounds. We found an increase in the likelihood of firms hiring incoming CEOs with the same functional backgrounds as the outgoing CEOs. Incoming CEOs with functional backgrounds in engineering/manufacturing are more likely to be hired by research-oriented firms.Incoming CEOs with functional backgrounds in accounting/finance are more likely to be hired by poorly performing firms. We also find that firms are more likely to change the functional background of the successor relative to the predecessor when there has been poor prior performance and the firm has higher institutional investor ownership.

Can outside CEO successors bring innovation to firms? Evidence from China

“…Predecessor CEO serves as one of the four key factors affecting executive succession (Kesner and Sebora, 1994). A large body of literature has investigated the effect of predecessors' characteristics and administrative style on successors' features (such as origin, gender and functional and education background) (Elsaid et al, 2016;Kotin and Kotin, 1967) and their post-succession strategic decision-making and performance (Dwivedi et al, 2018;Helmich, 1974;Quigley and Hambrick, 2012). Among CEO characteristics, tenure serves as one of the most important factors that affects organizational outcomes in multiple facets including organizational performance (Simsek, 2007;Henderson et al, 2006), strategic change (Weng and Lin, 2012), R&D investment (Zona, 2016) and firm innovation (Wu, 2014;Wu et al, 2005).…”

Examining The Effect Of Change In CEO Gender, Functional And Educational Background On Firm Performance And Risk

“…Oakley (2000) finds that corporate policies and practices, especially when it comes to training and career development, are a major factor in preventing females from reaching the CEO position. Young female managers usually do not get any line experience in operations, manufacturing and/or marketing (Elsaid et al, 2014). This line experience is an essential component in the ascent of any manager to the CEO position (Elsaid et al, 2014).…”

“…Young female managers usually do not get any line experience in operations, manufacturing and/or marketing (Elsaid et al, 2014). This line experience is an essential component in the ascent of any manager to the CEO position (Elsaid et al, 2014).…”

“…We follow prior research by Murray (1989), Michel and Hambrick (1992), Westphal and Zajac (1995) and Elsaid et al, (2014) in determining the CEO functional backgrounds by examining the prior job titles and employment history. Output functional backgrounds (OUTPUT) include positions in sales and marketing.…”

“…We follow prior research by Westphal and Zajac (1995), Zajac and Westphal (1996) and Elsaid et al, (2014) in determining the CEO educational backgrounds. We divide the CEO educational backgrounds into four categories: those with no undergraduate degree (NODEGR), those where the highest degree obtained is an undergraduate degree (UNDER), those where the highest degree obtained is a masters degree (or its equivalent) (MASTER) and those where the highest degree obtained is a PhD degree (PHD).…”