Organizational Performance as an Antecedent of Inside/Outside Chief Executive Succession: An Empirical Assessment

Abstract

This study assessed the conventional formula that poorly performing companies are more likely to replace chief executive officers (CEOs) with outside, rather than inside, successors. An examination of all New York Stock Exchange companies experiencing CEO succession over one year strongly indicated nonlinear relationships between multiple indices of organizational performance and choice of successor types. As expected, companies with reasonable performance prior to succession did not opt for outside successors. Poorly performing companies, however, did not choose outsiders either. Only companies with midrange performance chose outside succession.