The Effect of CEO Succession on Stockholder Wealth in Large Firms Following the Death of the Predecessor

Abstract

Using event time methodology, this study explores, over the 17-year period of 1966 to 1982, the effect on the price of common stock in large publicly held corporations of Chief Executive Officer (CEO) succession following the death of each CEO's predecessor. The market was found to react positively to the announcement of internal succession, but external succession was not associated with significant abnormal returns. The findings support the importance of examining the organizational conditions surrounding succession events.