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

Wei Shen, Albert A. Cannella

Research output: Contribution to journalArticle

93 Scopus citations


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
Issue number2
StatePublished - Feb 1 2003



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

ASJC Scopus subject areas

  • Business and International Management
  • Strategy and Management

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