Are All Interim CEOs Created Equal? Evidence from Investor Perceptions and CEO Behavior

I examine the market perception of different types of interim CEO successions as well as CEO behavior of different types of interim CEOs. Using a hand-collected dataset, I find that there are two types of interim CEOs: aspiring and place-holding. I find that the market perceives the appointment of place-holding interim CEOs as bad news and the appointment of aspiring interim CEOs as similar to the appointment of permanent CEOs. I further study actions taken by interim CEOs and do not find evidence that aspiring interim CEOs act myopically. Rather they appear to invest more in discretionary expenses, such as research and development, which suggests that they focus on increasing long-term shareholder value. Thus, market expectations of aspiring interim CEOs are in line with CEO behavior. In addition, analysis of CEO effort suggests that place-holding interim CEOs exert less effort than permanent CEOs. Specifically, I find preliminary evidence that they issue less accurate forecasts. Overall, this paper provides initial evidence consistent with career concerns of interim CEOs resulting in different CEO behavior.