The Match between CEO and Firm

SAM ALLGOOD, University of Nebraska - Lincoln
Kathleen A. Farrell, University of Nebraska - Lincoln

Document Type Article

Published in Journal of Business, 2003, vol. 76, no. 2. Copyright © 2003 by The University of Chicago. Used by permission.

Abstract

We investigate the role of job-match heterogeneity in the CEO labor market. We document a high percentage of CEO turnovers in the early years of tenure as illustrated by the hazard that increases until the fifth year of CEO tenure and then decreases. Evidence suggests that a good match is more likely if the new CEO performs better than the previous CEO. The best matches tend to occur when inside (outside) CEOs follow previous CEOs who quit (are dismissed). Evidence consistent with match theory in the CEO labor market suggests factors that influence the likelihood of observing a good match.