Will succession planning increase shareholder wealth? Evidence from investor reactions to relay CEO successions

Wei Shen, Albert A. Cannella

Research output: Contribution to journalArticle

90 Citations (Scopus)

Abstract

Our study examines investor reactions to a specific form of succession planning-relay succession. Theory predicts that both the initiation and the outcome of a relay CEO succession process will influence shareholder wealth. Our results show that investors generally do not react to the initiation of the process as indicated by heir apparent appointment; but react negatively when the process ends in heir apparent exit from the firm and react positively when the process ends in heir apparent promotion to the CEO position. We also found a strong positive investor reaction to outside CEO promotion and a negative investor reaction to nonheir inside CEO promotion. Further, firm performance exerts an important influence on the wealth effect of heir apparent promotion and exit.

Original languageEnglish (US)
Pages (from-to)191-198
Number of pages8
JournalStrategic Management Journal
Volume24
Issue number2
DOIs
StatePublished - Feb 2003
Externally publishedYes

Fingerprint

Shareholders
Planning
Succession planning
Investors
CEO succession
Shareholder wealth
Chief executive officer
Exit

Keywords

  • CEO succession
  • Event study
  • Firm performance
  • Shareholder wealth
  • Succession planning

ASJC Scopus subject areas

  • Business and International Management
  • Management of Technology and Innovation
  • Strategy and Management

Cite this

Will succession planning increase shareholder wealth? Evidence from investor reactions to relay CEO successions. / Shen, Wei; Cannella, Albert A.

In: Strategic Management Journal, Vol. 24, No. 2, 02.2003, p. 191-198.

Research output: Contribution to journalArticle

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