"I will be back" : when and why do firms hire former CEOs?

Abstract

This study applies the Resource Based View (RBV) and Resource Dependence Theory (RDT) to examine when and why firms rehire their own former CEOs. Particularly, it argues that CEO succession researchers should depart from the dichotomy of successor origin—insider CEO and outsider CEO—and turn their attention instead to CEO outsiderness. Using long-term data (1997-2014) from the U.S. S&P 1500, this research examines whether organizational decline, former CEO skills, and Board of Directors’ characteristic and structure are associated with the probability of rehiring of former CEOs. To avoid the endogeneity issue, Heckman’s two-stage model is used. Results from the analysis of these data clearly demonstrate that firms are more likely to rehire former CEOs when (1) firms have lower earnings-per-share over a long period of time; (2) former CEOs have a longer former tenure and those former CEOs are founders of the firm they left; and (3) the current Board has a shorter average tenure and is less independent. These findings have clear implications for the nature of these boomerang CEO successions. Keywords: Boomerang CEO, CEO succession, Organizational Decline, Corporate Governance, Outsiderness, RBV, RDT

Date of Award	2016
Original language	English
Awarding Institution	The Hong Kong University of Science and Technology