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CEO Champions: what drives their success? Can they be effectively replaced?

Yuan, T. (2017) CEO Champions: what drives their success? Can they be effectively replaced? PhD thesis, University of Reading

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This thesis constructs unique CEO performance measurements and rankings, which focus on long-term firm performance from different dimensions. The first empirical analysis of this thesis defines CEO Champions and examines whether CEO Champions can be successfully replaced by their successors. Two CEO Champion Leagues are constructed, and performance of these CEOs and their successors are tested. The documented results show that CEO Champions' successors outperform the successors of Non-Champions' on average. Although Champions’ successors cannot sustain their predecessors’ performance in the univariate framework due to luck reversion, growth cyclicality and priorities diversion, they tend to generate as superior operating performance as their predecessors did after controlling for growth cyclicality in the multivariate framework. These robust findings suggest that corporate boards can effectively replace CEO Champions on average by hiring better successors. Also, predecessors’ legacies left within the firms after stepping down substantially affect their successors’ performance in voluntary turnover events. The second analysis of the thesis explores under what circumstances the successors tend to outperform their champion predecessors. It examines corporate governance, successor origin, predecessor influence and controls for changes in CEO and firm characteristics. It documents a robust and negative relation between insider dummy and successful replacement, indicating that outsiders are more likely to replace champion predecessors successfully. In line with the reputational capital view of directorships, a busy board is found to have better capability to replace CEO Champions effectively. Champion predecessors tend to be reappointed to the board, and their successors tend to sustain their success. Champion founders' successors are demonstrated to have greater performance improvement after turnover events, which suggest that champion founders are less likely to be entrenched. The final empirical analysis focuses on constructing two effective CEO performance measurement indices to build CEO rankings and reveal Top 100 CEOs in each CEO list. Results show that the weighted performance CEO ranking is negatively and significantly associated with the forced turnover dummy, suggesting that higher ranked CEOs are less likely to be forced out. Also, the weighted performance CEO ranking in this study has better prediction power than other forced turnover prediction models with single performance measure.

Item Type:Thesis (PhD)
Thesis Supervisor:Alexandridis, G. and Mavis, C.
Thesis/Report Department:Henley Business School
Identification Number/DOI:
Divisions:Henley Business School > ICMA Centre
ID Code:75719


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