CEO Change and Firm Performance in Large Corporations: Succession Effects and Manager Effects

This paper argues that the succession/performance relationship is a function of two distinct, complementary concepts: manager effects and succession effects. Hypotheses are tested using a cross-sectional/longitudinal research design, with a sample of 209 large corporations. The results suggest that announcements of CEO changes are typically associated with a reduction in the value of the firm, as reflected in the perceptions of the stock market, and that CEO successors tend to significantly influence the production and investment decisions of their firms. These results hold for both insider and outsider succession.