Managerial Legacies, Entrenchment, and Strategic Inertia

• 成果类型: Article
• 署名作者: Casamatta, Catherine; Guembel, Alexander
• 署名单位: Universite de Toulouse; Universite Toulouse 1 Capitole; Toulouse School of Economics; Universite de Toulouse; Universite Toulouse 1 Capitole
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/j.1540-6261.2010.01619.x
• 发表日期: 2010
• 页码: 2403-2436
• 关键词: capital reallocation; career concerns; ceo turnover; INVESTMENT; incentives; reorientation; COMPENSATION; management; governance; CONTRACTS

摘要

This paper argues that the legacy potential of a firm's strategy is an important determinant of CEO compensation, turnover, and strategy change. A legacy makes CEO replacement expensive, because firm performance can only partially be attributed to a newly employed manager. Boards may therefore optimally allow an incumbent to be entrenched. Moreover, when a firm changes strategy it is optimal to change the CEO, because the incumbent has a vested interest in seeing the new strategy fail. Even though CEOs have no specific skills in our model, legacy issues can explain the empirical association between CEO and strategy change.