Are boards reluctant to remove poorly performing successors to interim CEOs?

Deskripsi

Interim CEO appointments are disruptive and costly to firms. Boards justify them as necessary to find the right permanent successor. But what happens if that successor performs poorly? This paper argues that directors may be reluctant to remove a poorly performing successor to an interim CEO early in their tenure. It posits that this may be owing to directors' concerns for their own reputations or for the firm. Results demonstrate that successors to interim CEOs are considerably less likely than successors to permanent CEOs to experience performance-related early departures. This appears to be owing to directors' efforts to avoid further harming the firm. Additional analyses suggest these concerns may be justified, as early exits by successors to interim CEOs are associated with post-succession market declines.