CEO Succession Type and Stock Crash Risk: Insider versus Outsider CEOs

• In Event: CEO/CFO Impact

Abstract

This study examines the association between two types of CEO succession and future stock crash risk. Using a large sample of firms from 1993 to 2017, we find that CEOs who are promoted from inside are less likely to trigger future stock crash risk than CEOs who are selected from outside. Moreover, we document that this relationship between CEO succession type and stock crash risk is more pronounced for firms with more conservative accounting policies and is less pronounced for firms engaged in greater amount of earning management activities. Finally, our results are robust to controlling market-level and firm-level effects and hold for other sensitivity tests. This paper contributes to the accounting and managerial literature by lightening the path to understanding the economic consequences of CEO succession type.

Authors

• Heeick Choi, University of Massachusetts-Lowell

• Khondkar E Karim, University of Massachusetts-Lowell

• Anqi Tao, University of Massachusetts-Lowell

• Yiye Zhang, University of Massachusetts-Lowell