TitleAn examination of a firm's use of a short term succession plan using an interim CEO to facilitate CEO turnover
NameDiSalvio, Joan (author), Gordon, Elizabeth A (chair), Palmon, Dan (internal member), Lee, Cheng Few (internal member), Balsam, Stephen (outside member), Rutgers University, Graduate School - Newark,
Chief executive officers,
DescriptionThis study examines a firm’s use of a short term succession plan using an Interim Chief Executive Officer (ICEO) to facilitate CEO turnover. NYSE requirements and prior research support the use of permanent successors and the NYSE demands firms have a short term succession plan. The results of this study provide evidence on the costs and benefits of using an interim ICEO as part of a short term succession plan versus naming a permanent successor. I find that firms who replace a CEO using an interim CEO as part of a short term succession plan experience large negative abnormal returns at the departure announcement, whether the CEO departure is voluntary or involuntary. Subsequently, after an involuntary departure, I find the use of interim CEOs is associated with large positive abnormal returns at the announcement of the eventual permanent successor, whether that successor is an insider or outsider. The net effect (initial negative plus the subsequent positive reaction) associated with the use of an interim CEO who replaces a CEO who leaves involuntarily is ironically a less negative outcome than if a firm chooses an immediate successor. However, if the CEO departs voluntarily, the shareholders are heavily penalized when an interim CEO is used as part of a short term succession plan. This is contrary to prior CEO literature which finds no abnormal returns upon replacement of a departing CEO who leaves voluntarily. I find that firms use interim CEOs as part of a short term succession plan at a rate of 11% of all turnovers between 2000 and 2005. I find the mean tenure of an interim CEO, and duration of the short term succession plan, is 201 days, which could allow timely replacement and careful assessment of a replacement. I also describe the characteristics of interim CEOs and identify the governance characteristics of firms who use them.
NoteIncludes bibliographical references
Noteby Joan DiSalvio
CollectionGraduate School - Newark Electronic Theses and Dissertations
Organization NameRutgers, The State University of New Jersey
RightsThe author owns the copyright to this work.