The aftermath of CEO succession via hierarchical jumps on firm performance and agency cost: Evidence from Chinese firms

Syed Ghulam Meran Shah · Mingfeng Tang · Muddassar Sarfraz · Zeeshan Fareed

40 citations0/0 files storedApplied Economics Letters

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Corporate Finance and Governance Human Resource and Talent Management Family Business Performance and Succession

Abstract

This paper analyzes the effect of CEO succession via overall hierarchical jumps on Chinese firm performance and agency cost. It categorizes hierarchical jumps into low, medium and high level. The study reveals through panel regression analysis that the CEOs appointed via medium hierarchical jumps substantially enhance firm performance. Conversely, the successors appointed through low and high hierarchical jumps have relatively no effect on firm profitability. Conclusively, this research evaluates that the aged CEOs should be preferred among the CEOs successors via high hierarchical jumps, which have mitigated the agency problem decisively.

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References

2000Agency Costs and Ownership Structure 2015Do Humble CEOs Matter? An Examination of CEO Humility and Firm Outcomes 2016Board hierarchy, independent directors, and firm value: Evidence from China 2015The Impact of CEO Succession with Gender Change on Firm Performance and Successor Early Departure: Evidence from China’s Publicly Listed Companies in 1997–2010 2013The use of variance decomposition in the investigation of CEO effects: How large must the CEO effect be to rule out chance?2011All in the family? Social performance and corporate governance in the family firm 2013Appointments of outsiders as CEOs, state-owned enterprises, and firm performance: Evidence from China

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