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The Value of CEO Mobility: Contextual Factors That Shape the Impact of Prior CEO Experience on Market Performance and CEO Compensation
Author(s) -
Bragaw Nathan A.,
Misangyi Vilmos F.
Publication year - 2015
Publication title -
human resource management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.888
H-Index - 94
eISSN - 1099-050X
pISSN - 0090-4848
DOI - 10.1002/hrm.21737
Subject(s) - compensation (psychology) , business , value (mathematics) , shareholder , executive compensation , sample (material) , enterprise value , value creation , accounting , market value , marketing , industrial organization , corporate governance , psychology , social psychology , finance , chemistry , chromatography , machine learning , computer science
This study examines the value that prior CEO experience has for the companies that hire such CEOs —as reflected in the firms’ subsequent market‐based performance—as well as its value for the CEO that possesses this experience—as reflected in his or her initial compensation. While we suggest that shareholders tend not to benefit from firms hiring experienced CEOs , we also argue that particular firm and industry contextual factors that shaped the prior CEO experience help ameliorate this detrimental effect. Regardless, we also suggest that prior CEO experience generally stands to benefit the CEOs , in that it brings them a compensation premium over those CEOs without such prior experience. We tested our hypotheses on a sample of 654 US CEO succession events that occurred between 2001 and 2004 and found broad support for our hypotheses. We close with a discussion of the implications of our findings for future research as well as what they mean for firms hiring experienced CEOs and for CEO careers more generally. © 2015 Wiley Periodicals, Inc.