Investor Perceptions Of Ceo Successor Selection In The Wake Of Integrity And Competence Failures: A Policy Capturing Study
Business headlines regularly feature episodes of organizational misconduct, such as product safety problems, environmental violations, employee mistreatment, and securities lawsuits, and their aftermath. In such scenarios, shareholders demand answers from the people at the top, even if those people were not directly responsible for the problem. As a result, companies often fire the CEO as a means to restore investor confidence. Does this work? It depends on the type of misconduct and who is the CEO ‘s successor. Following a competence failure, investors welcome the appointment of an outsider, but they are indifferent to inside and interim successors. Following an integrity failure, shareholders greet outside and interim CEO successors favorably while frowning on the promotion of insiders .
