Managerial Horizon and the Choice for Insiders versus Outsiders: Evidence from Compensation Structures of CEO Successors
Speaker
Abstract
Because of their more diversified human capital and their inclination to build reputation in their new firm quickly, outside CEO successors are argued to have shorter horizons relative to CEO successors that are selected from within the firm. This paper examines the extent to which firms correct for this shorter horizon of outside CEO successors by means of the provision of short-term versus long-term oriented incentive compensation. From a sample of 171 UK CEO successions from 1998-2004, I find that outside successors are provided less short-term oriented and more long-term oriented incentives relative to inside successors. The results are robust to various sensitivity analyses. |
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| Paolo Perego |
