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Are Outsiders Handicapped in CEO Successions?

Author

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  • Anup Agrawal

    (Cluverhouse College of Business, University of Alabama)

  • Charles R. Knoeber

    (Department of Economics, North Carolina State University)

  • Theofanis Tsoulouhas

    (Department of Economics, North Carolina State University)

Abstract

We argue that outsiders are handicapped in CEO successions to strengthen the incentive that the contest to become CEO provides inside candidates. Handicapping implies that a firm is more likely to pick an insider for the CEO position where insiders are more comparable to each other and less comparable to outsiders, and where there are more inside candidates. Using a novel measure of the comparability of insiders based on firm organizational structure, we analyze over 1,000 CEO successions in large U.S. firms over the 1974-1995 period and find a variety of evidence consistent with these implications of handicapping.

Suggested Citation

  • Anup Agrawal & Charles R. Knoeber & Theofanis Tsoulouhas, "undated". "Are Outsiders Handicapped in CEO Successions?," Working Paper Series 003, North Carolina State University, Department of Economics, revised Apr 2004.
    • Handle: RePEc:ncs:wpaper:003
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