CEO selection as risk-taking: A new vantage on the debate about the consequences of insiders versus outsiders

Timothy J. Quigley, Donald C. Hambrick, Vilmos Fosnocht Misangyi, G. Alessandra Rizzi

Research output: Contribution to journalArticle

Abstract

Research Summary: Our paper sheds new light on the performance implications associated with insider versus outsider CEOs. We frame CEO selection as risk-taking, in which outsiders are relatively risky hires, with a greater tendency to generate extreme performance outcomes—either positive or negative—as compared to insiders. We base this expectation on two complementary theoretical perspectives: human capital and information asymmetry. We conduct multiple tests on large samples of CEO successions, with controls for endogeneity, and find that outsiders are indeed associated with more extreme performance outcomes than are insiders. Managerial Summary: We shed new light on the performance implications associated with outsider CEOs. Instead of asking the customary question, “Do outsider CEOs, on average, perform better or worse than insider CEOs?,” we frame CEO selection as risk-taking. Under this view, outsiders are relatively risky hires, with a greater likelihood of generating extreme performance outcomes—either positive or negative—as compared to insiders. We conduct multiple tests on large samples of CEO successions and find that outsiders are indeed associated with more extreme performance outcomes than are insiders.

Original languageEnglish (US)
Pages (from-to)1453-1470
Number of pages18
JournalStrategic Management Journal
Volume40
Issue number9
DOIs
StatePublished - Jan 1 2019

Fingerprint

Risk taking
Outsider
Insider
Chief executive officer
CEO succession
Human capital
Information asymmetry
Endogeneity

All Science Journal Classification (ASJC) codes

  • Business and International Management
  • Strategy and Management

Cite this

@article{10bc3e83a7f044528223d596e3e1175e,
title = "CEO selection as risk-taking: A new vantage on the debate about the consequences of insiders versus outsiders",
abstract = "Research Summary: Our paper sheds new light on the performance implications associated with insider versus outsider CEOs. We frame CEO selection as risk-taking, in which outsiders are relatively risky hires, with a greater tendency to generate extreme performance outcomes—either positive or negative—as compared to insiders. We base this expectation on two complementary theoretical perspectives: human capital and information asymmetry. We conduct multiple tests on large samples of CEO successions, with controls for endogeneity, and find that outsiders are indeed associated with more extreme performance outcomes than are insiders. Managerial Summary: We shed new light on the performance implications associated with outsider CEOs. Instead of asking the customary question, “Do outsider CEOs, on average, perform better or worse than insider CEOs?,” we frame CEO selection as risk-taking. Under this view, outsiders are relatively risky hires, with a greater likelihood of generating extreme performance outcomes—either positive or negative—as compared to insiders. We conduct multiple tests on large samples of CEO successions and find that outsiders are indeed associated with more extreme performance outcomes than are insiders.",
author = "Quigley, {Timothy J.} and Hambrick, {Donald C.} and Misangyi, {Vilmos Fosnocht} and Rizzi, {G. Alessandra}",
year = "2019",
month = "1",
day = "1",
doi = "10.1002/smj.3033",
language = "English (US)",
volume = "40",
pages = "1453--1470",
journal = "Strategic Management Journal",
issn = "0143-2095",
publisher = "John Wiley and Sons Ltd",
number = "9",

}

CEO selection as risk-taking : A new vantage on the debate about the consequences of insiders versus outsiders. / Quigley, Timothy J.; Hambrick, Donald C.; Misangyi, Vilmos Fosnocht; Rizzi, G. Alessandra.

In: Strategic Management Journal, Vol. 40, No. 9, 01.01.2019, p. 1453-1470.

Research output: Contribution to journalArticle

TY - JOUR

T1 - CEO selection as risk-taking

T2 - A new vantage on the debate about the consequences of insiders versus outsiders

AU - Quigley, Timothy J.

AU - Hambrick, Donald C.

AU - Misangyi, Vilmos Fosnocht

AU - Rizzi, G. Alessandra

PY - 2019/1/1

Y1 - 2019/1/1

N2 - Research Summary: Our paper sheds new light on the performance implications associated with insider versus outsider CEOs. We frame CEO selection as risk-taking, in which outsiders are relatively risky hires, with a greater tendency to generate extreme performance outcomes—either positive or negative—as compared to insiders. We base this expectation on two complementary theoretical perspectives: human capital and information asymmetry. We conduct multiple tests on large samples of CEO successions, with controls for endogeneity, and find that outsiders are indeed associated with more extreme performance outcomes than are insiders. Managerial Summary: We shed new light on the performance implications associated with outsider CEOs. Instead of asking the customary question, “Do outsider CEOs, on average, perform better or worse than insider CEOs?,” we frame CEO selection as risk-taking. Under this view, outsiders are relatively risky hires, with a greater likelihood of generating extreme performance outcomes—either positive or negative—as compared to insiders. We conduct multiple tests on large samples of CEO successions and find that outsiders are indeed associated with more extreme performance outcomes than are insiders.

AB - Research Summary: Our paper sheds new light on the performance implications associated with insider versus outsider CEOs. We frame CEO selection as risk-taking, in which outsiders are relatively risky hires, with a greater tendency to generate extreme performance outcomes—either positive or negative—as compared to insiders. We base this expectation on two complementary theoretical perspectives: human capital and information asymmetry. We conduct multiple tests on large samples of CEO successions, with controls for endogeneity, and find that outsiders are indeed associated with more extreme performance outcomes than are insiders. Managerial Summary: We shed new light on the performance implications associated with outsider CEOs. Instead of asking the customary question, “Do outsider CEOs, on average, perform better or worse than insider CEOs?,” we frame CEO selection as risk-taking. Under this view, outsiders are relatively risky hires, with a greater likelihood of generating extreme performance outcomes—either positive or negative—as compared to insiders. We conduct multiple tests on large samples of CEO successions and find that outsiders are indeed associated with more extreme performance outcomes than are insiders.

UR - http://www.scopus.com/inward/record.url?scp=85064711004&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=85064711004&partnerID=8YFLogxK

U2 - 10.1002/smj.3033

DO - 10.1002/smj.3033

M3 - Article

AN - SCOPUS:85064711004

VL - 40

SP - 1453

EP - 1470

JO - Strategic Management Journal

JF - Strategic Management Journal

SN - 0143-2095

IS - 9

ER -