Eahab Elsaid

Does experience matter? CEO successions by former CEOs

Purpose - This paper aims to investigate an interesting yet mostly ignored distinction within external CEO successions: outside successors who have previous CEO experience and those who do not. It examines stock market reaction, compensation and firm performance prior and post-succession. Design/methodology/approach - The authors used an event study, “Patell Findings - The authors find that the stock market reacts positively to the hiring of an outsider who is an exCEO. Compared with firms that hire non-exCEOs, firms that hire exCEOs had higher debt ratios and greater bankruptcy chances pre-succession, but post-succession, these firms still have worse financial performances. Non-exCEOs come from better performing firms than exCEOs. There is no consistently significant difference in compensation between an exCEO and a non-exCEO, though the compensation for both increases significantly from that of the predecessors and that of their previous positions. Research limitations/implications - Future research could focus on the cost-benefit tradeoff of hiring an exCEO. It would be interesting to examine the role of the board of directors in assessing this cost-benefit tradeoff and determining the optimal choice for the firm. An important aspect that has not been sufficiently examined in the literature is the CEO fit. Hiring an exCEO may not always be the right choice for the firm. Another area for future research could examine how the post-succession performance is affected by exCEO tenure in previous CEO position(s) and whether the exCEO worked in several industries or in the same industry. Practical implications - This paper also has implications for the board of directors. There seems to be a negative transfer of human capital when it comes to hiring exCEOs. The human capital theory suggests that job-specific experience positively relates to job performance. According to Hamori and Koyuncu, prior CEO experience may “lead to the formation of knowledge corridors and decision-making templates that make it difficult for individuals to take in inconsistent information or take actions that are different from past ones in a changed context. This, in turn, undermines performance”. Boards of directors should put more effort into considering inside relay successions and should be cautious when hiring an outsider who has prior CEO experience. A best-of-both-worlds scenario may be for boards to hire exCEOs into top executive positions, such as COO and/or president, so as to give them a chance to be groomed for the top position and familiarize themselves with the firm while still benefiting from their prior CEO experience. Originality/value - There is very little research on the distinction between outside CEOs with previous CEO experience and those with no such experience. This paper tries to shed some light on this important issue in corporate governance in order to explain why boards of directors would hire an outsider with or without previous CEO experience.

Sex stereotyping managerial positions

Purpose – The purpose of this paper is to examine how men and women sex stereotype managerial positions and how they view women in managerial roles in Egypt and the USA, in order to provide meaningful cross‐cultural comparisons.Design/methodology/approach – The study uses surveys that utilize the Schein descriptive index and the women as managers scale (WAMS) to compare perceptions on women in managerial positions in Egypt and the USA. The sample consists of 553 Egyptian and 324 American management students.Findings – The results show that in the Egyptian sample both males and females held negative views of women managers. However, in the US sample, women held more favourable views of women managers than did their male counterparts. In the Egyptian sample the English section female students had a more positive perception of female managers than their Arabic section counterparts.Research limitations/implications – The sample is limited to management students in Egypt and the USA. The Middle East includes c...

Re-examining the Glass Cliff Hypothesis using Survival Analysis: The Case of Female CEO Tenure

We use the glass cliff to study the appointment and employment duration of 193 female CEOs between 1992 and 2014 in a sample of large, small and mid-size North American firms. Consistent with the glass cliff, we find that women are appointed as CEOs in precarious situations. However, we find female CEOs are 40% less likely to face turnover at any point after appointment than male CEOs. This conflicts with an implication of the glass cliff and differs significantly from existing research which shows that female CEOs have only a slightly lower risk of turnover than male CEOs. Our larger, more recent sample captures changes in the labour market that explain the departure from the results of earlier studies. We find evidence that the lower turnover rate of female CEOs is related to firms’ desire to avoid the negative publicity that would accompany their termination, and we also show that greater education has a positive impact on CEO job security.

Successor CEO Functional and Education Background: Performance Antecedents and Consequences

To improve our understanding of the succession process we utilize a sample of 832 successions to examine firm and predecessor characteristics that influence the board’s choice of a successor’s functional and educational background. We find that outgoing CEO and firm characteristics influence the selection of successors’ functional backgrounds. Firms are more likely to hire new CEOs with functional backgrounds similar to the outgoing CEO. Research-oriented firms hire CEOs with the functional background that would permit them to understand the firm’s research processes. Firms with poor prior operating performance tend to hire successors with a financial/accounting background. Riskier firms are less likely to hire CEOs with a degree from an Ivy League institution. We also find that firms are more likely to change the functional background of the successor relative to the predecessor when there has been poor prior performance and the firm has higher institutional investor ownership. However, we do not find evidence that changing the functional background and/or the education level of the successor CEO improves firm performance.