An Empirical Study on Mechanism of CEO Successor Selection and Its Implication on Corporate Risk-taking: Based on the Perspective of CEO Successor's Age

Abstract

Abstract:

In terms of CEO successor's age, the paper investigates the factors that affect CEO's selection and the mechanism underlying the process. Additionally, we examine corporate risk-taking following CEO succession and how it is related to CEO successor's age. In the Chinese firms where CEO succession occurred between 1998 and 2011, by exploring IV regression model, we find CEO successor's age changes with board age to the same direction; the change of CEO successor's age is negatively related to the change of corporate risk-taking following the succession. Our further test confirms that the gap between CEO successor's age and that of board give rise to the increase in likelihood of directors' leaving and decrease of firms performance after succession. Our theoretical analysis and empirical evidence not only further the understanding of the process and outcome of CEO succession, but also bear practical meaning in improving efficiency of CEO succession and encouraging firm shoulder reasonable risk to innovate without getting into financial crisis.

Key words: CEO successor, age, directors, corporate risk-taking

Liu Xin, Xue Youzhi. An Empirical Study on Mechanism of CEO Successor Selection and Its Implication on Corporate Risk-taking: Based on the Perspective of CEO Successor's Age[J]. , 2016, 28(5): 137-149.

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