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Does CEO Succession Planning (Disclosure) Create Shareholder Value?

Published online by Cambridge University Press:  11 April 2022

John J. McConnell  and
Qianru Qi Open the ORCID record for Qianru Qi [Opens in a new window]
John J. McConnell*
Affiliation:
Purdue University Krannert School of Management
Qianru Qi
Affiliation:
University of Ottawa Telfer School of Management qqi@uottawa.ca
*
mcconnj@purdue.edu (corresponding author)
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Abstract

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Average cumulative abnormal returns around proxy statements containing “in-depth” disclosures of planning for CEO succession are significantly positive indicating that succession planning is a value-added undertaking. Exploiting a quasi-natural experiment based on a 2009 SEC ruling that induced more succession planning disclosures, we find that succession planning is not value-adding for all firms. Rather, succession planning is value-enhancing for larger, more complex, and more stable firms. Importantly, CEO succession planning appears to be value reducing for smaller, simpler, and less stable firms.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 57 , Issue 6 , September 2022 , pp. 2355 - 2384
Creative Commons
Creative Common License - CCCreative Common License - BY
This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (https://creativecommons.org/licenses/by/4.0), which permits unrestricted re-use, distribution and reproduction, provided the original article is properly cited.
Copyright
© The Author(s), 2022. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

Footnotes

An earlier draft of this article was previously circulated under the title “Just Talk? CEO Succession Plan Disclosure, Corporate Governance and Firm Value.” We thank Sergiy Chernenko, David Denis, Diane Denis, Mara Faccio, Kate Holland, Kose John, Ping Liu, Ron Masulis, Lalitha Naveen (the referee), Henri Servaes, Michael Woeppel, Deniz Yavuz, and David Yermack, and the participants at the 2019 Financial Management Association annual meeting for helpful comments and suggestions.

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