Shareholder activists and frictions in the CEO labor market

  • Using hand-collected data on CEO appointments during shareholder activism campaigns, this study examines whether shareholder involvement in CEO recruiting affects frictions in CEO hiring decisions. The results indicate that appointments of CEOs who are recruited with shareholder activist influence are followed by more favorable stock market reactions and stronger profitability improvements than CEO appointments that also occur during activism campaigns but without the influence of activists. I find little evidence that shareholder activists increase hiring frictions by facilitating the recruiting of CEOs who will implement myopic corporate policies. Analyses of recruiting process characteristics reveal that activist influence is associated with more resources being dedicated to the CEO search process and with a higher propensity to recruit CEOs from outside the firm. These findings contribute to the CEO labor market literature, which tends to focus on the decision to remove incumbent CEOs but provides limited insights into CEO recruiting.

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Author:Thomas Keusch
Parent Title (English):LawFin working paper ; No. 19
Series (Serial Number):LawFin Working Paper (19)
Publisher:Center for Advanced Studies on the Foundations of Law and Finance, House of Finance, Goethe University
Place of publication:Frankfurt am Main
Document Type:Working Paper
Year of Completion:2021
Year of first Publication:2021
Publishing Institution:Universit├Ątsbibliothek Johann Christian Senckenberg
Release Date:2021/09/09
Tag:corporate governance; executive labor market; shareholder activism
Page Number:44
Last Page:42
Institutes:Rechtswissenschaft / Rechtswissenschaft
Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF)
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE)
Wissenschaftliche Zentren und koordinierte Programme / DFG-Forschergruppen / Foundation of Law and Finance
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
3 Sozialwissenschaften / 34 Recht / 340 Recht
Licence (German):License LogoDeutsches Urheberrecht