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Change of leadership is a big and important incident in the life of a company. As important as it is for the company, it is equally a difficult decision to make for the board of directors. Most of the big companies have a committee dedicated toward laying out a succession plan of the existing chief executive officer (CEO). The big dilemma, however, is whether to appoint someone from within the company and let him or her lead as he or she has been associated with the company and knows the internal dynamics better or to induct some outsider and take advantage of his or her expertise/reputation in the market. The balance appears lopsided when the result of this chapter is perused. Companies on an average seem to reap more benefits if an existing executive is promoted to the office of CEO rather than hiring an outsider. The benefits which are talked here from promoting insiders are indirect ones and do not have a direct bearing with the finances of the company. As shown by the results that insiders are more likely to continue with the company for a longer duration as the CEO as well as not as the CEO which defers the hiring and firing costs (screening candidates, conducting interviews, huge severance packages, golden parachutes, etc., are the costs referred to) for a longer period. Other benefits arising from insider CEOs are upfront awareness about the company’s work culture, production/service capacity, efficiency, strategies followed till date, etc., which gives him or her a head start compared to an outsider.

The term “Insider CEO” refers to actor in the top management at corporate level who has the advantage of having better information regarding a company’s resources to make investment decisions. This study aims to examine the relationship between insider chief executive officers (CEOs) and investment efficiency in emerging economies.

The authors comprises sample of nonfinancial companies listed on the Indonesia Stock Exchange during the period of 2011–2021, using an archival approach through regression analysis.

This study demonstrates a significant negative relationship between insider CEOs and investment efficiency. In addition, audit quality as the firm audited by BIG4 accounting firm changes the direction of previously negative findings, turning them into significant positive relationships, and audit quality acts as a moderating factor on the insider CEOs and investment efficiency nexus. Furthermore, the authors conducted a series of endogeneity and robustness tests to strengthen the results of this study.

This study offers new ideas in the investment literature and its practice in companies, where it highlights the role of the existence of an insider CEO in practice on investment efficiency. The authors provide recommendations to companies, potential investors and policymakers regarding the potential for insider CEOs to influence investment returns that tend to be less efficient. Therefore, this study proves that the presence of an insider CEO has a higher risk-taking preference, which has the potential to influence less efficient investment practices.

Several previous studies have focused more on the role of CEOs who come from outside the company and their impact on investment practices. However, it is not clear whether insider CEOs will influence the company’s investment efficiency practices driven by the perspective of “risk preferences and investment returns”. To the best of the authors’ knowledge, this is the first study to substantiate the role of CEOs based on their origin and their impact on less efficient investment practices.

The authors examine whether the stronger information content of chief financial officer (CFO) insider trading relative to that of chief executive officers (CEOs) results from a different willingness to exploit the information asymmetry that exists between executives and outside shareholders (scrutiny hypothesis) or from differing financial acumen between CFOs and CEOs (financial acumen hypothesis). The authors consider the information content of equity purchases for CEOs and CFOs. The paper aims to discuss these issues.

The authors examine purchase-based insider trading portfolio returns before and after the implementation of SOX in firms with high versus low regulation, for routine and opportunistic managers, and in samples of CEOs with prior CFO experience.

The authors provide evidence that SOX affected executives differently and provide support for the scrutiny hypothesis. CFO-based portfolios remain the most profitable post-SOX, but the magnitude of returns has fallen in absolute and relative terms compared to returns for CEOs. Superior financial acumen of CFOs does not appear to be supported. CEO purchase trade returns appear to be lower than CFO returns because CEOs face greater visibility and scrutiny and thus limit their own trading aggressiveness.

This research contributes to the literature in explaining why CFOs best CEOs in their insider trading purchases and documents that in the post-SOX period, CFO insider trading superiority disappears.

The purpose of this paper is to investigate the impact of insider trading on subsequent stock returns in the UK, with a specific focus on the impact of the global financial crisis of 2007-2008 on the relation between CEO and CFO stock purchases and returns.

The empirical analysis uses 10,230 purchases executed in 679 UK firms by 1,477 directors during the period from 2000 to 2010. Subsequent market-adjusted stock returns are regressed on a set of firm-specific accounting, market and corporate governance variables as well as the characteristics of CEOs and CFOs. Additionally, the analysis distinguishes between the opportunistic and routine trades.

The findings reveal that the position of the trading director and the nature of their trades are important in determining the impact on returns of insider trades. In particular, CEO purchases are on the whole more informative than CFO purchases and opportunistic purchases. The trades in the post-crisis period have a greater impact on subsequent stock returns.

The empirical analysis is limited to the trades made by two executives. Future research should consider inside trades by all directors and distinguish between executive and non-executive directors. Also, a behavioral measure should be developed to test if the financial crisis affected the trading behavior of directors and whether directors use insider trading strategically to signal information to the market.

The impact of directors’ dealings on stock returns is not homogeneous. Financial analysts and investors should pay more attention to different types of trades and the identity of trading director.

This paper, to the authors’ knowledge, provides the first attempt that combines in the same framework the identity and personal attributes of trading executive directors, firm-level corporate governance features, the nature of purchase transactions and the trading period characteristics. Furthermore the empirical analysis is carried out during a period that also covers the recent global financial crisis period and its immediate aftermath.

The purpose of this paper is to examine the insiders’ activities (buy/sell) during the recent meltdown of the homebuilders’ industry.

This study applies a regression model to analyze the relationship between the insiders’ net sales and variables that could be affecting the trading decisions controlling for other market variables.

The results show that CEOs of homebuilding companies had net positive selling activities and enjoyed massive gains by timing the market correctly. The insiders’ massive selling period was followed by significant declines in share prices of homebuilding companies. More specifically, CEOs (but not all top executives) acted as contrarian investors and sold when the share prices hit a record high, coupled by optimistic analysts’ recommendations, which were later seen as incorrect by the market. Also, CEOs sold at a time when EPS was at its highest level.

The current work can not disprove the “argument of diversification” cited by insiders as the reason for their stock sell off, mainly because it is not possible to obtain data about the CEOs’ personal portfolios.

This paper implies that CEOs were able to time the market by forecasting the trend in their industry.

The paper investigates the period between January 2004 and August 2007 which is characterized by mass selling by CEOs in the whole industry of home building companies and not only a specific entity.

The empirical support for agency theory explanations for the great variance in CEO pay has been equivocal. Drawing from the performance appraisal literature, we hypothesize that boards of directors incorporate human judgment into the evaluation and reward of CEO performance in order to balance managerial risk with agency costs. We test Baysinger and Hoskisson’s (1990) proposition that insider‐dominated corporate boards rely on subjective performance evaluation to reward the CEO, and we argue that R&D intensity influences this relationship. Using a sample of Fortune firms, findings support our contention that human judgment is important in evaluating and rewarding CEO performance.

This study aims to explore the relationship between chief executive officer (CEO) power and stock price crash risk in India. Furthermore, it seeks to analyse how insider trades may moderate the impact of CEO power on stock price crash risk.

A study of 236 companies from the S&P BSE 500 Index (2014–2023) have been analysed through pooled ordinary least square (OLS) regression in the baseline analysis. To enhance the results' reliability, robustness checks include alternative methodologies, such as panel data regression with fixed-effects, binary logistic regression and Bayesian regression. Additional control variables and alternative crash risk measure have also been utilised. To address potential endogeneity, instrumental variable techniques such as two-stage least squares (IV-2SLS) and difference-in-difference (DiD) methodologies are utilised.

Stakeholder theory is supported by results revealing that CEO power proxies like CEO duality, status and directorship reduce one-year ahead stock price crash risk and vice versa. Insider trades are found to moderate the link between select dimensions of CEO power and stock price crash risk. These findings persist after addressing potential endogeneity concerns, and the results remain consistent across alternative methodologies and variable inclusions.

This study significantly advances research on stock price crash risk, especially in emerging economies like India. The implications of these findings are crucial for investors aiming to mitigate crash risk, for corporations seeking enhanced governance measures and for policymakers considering the economic and welfare consequences associated with this phenomenon.

This study explores the relationship between US public firms’ dividend policies and CEO selection. Specifically, we examine the association between successor CEOs’ prior employment and firms’ payout policies around CEO turnover events.

Using Execucomp, we identify a sample of 1,021 S&P 1500 firms with CEO turnover events occurring from 2010 to 2016. We categorize successor CEOs by their prior position as a public insider (hired internally from the public firm), public outsider (hired from a different public firm) or private outsider (hired from a private firm). We investigate dividend policies around CEO turnovers using differences-in-means and probit analyses.

Firms that hired private CEOs were 11.0% less likely to have paid a dividend in the year prior to the CEO turnover. However, those firms that had paid a dividend in the prior year were 5.4% more likely to subsequently drop their dividend. This finding supports a distinct effect that is related to the successor CEOs’ prior experience managing private firms, rather than an “outsider” effect: payout policies of firms that hired public outsiders were no different from those that hired public insiders.

We show that public firms that hire private CEOs tend to have dividend policies similar to those of private firms. This evidence suggests that human capital developed at private firms is applied when CEOs transfer to public firms. We show that outsiders from public firms behave differently from outsiders from private firms, and we are the first to measure the frequency of each kind of CEO successor: public insiders, public outsiders and private outsiders. These findings suggest a method to indirectly study private firms using more readily available data from public firms led by private CEOs.

The purpose of this paper is to introduce CEO succession (and subsequent TMT turnover) as a knowledge enabler. Focusing on absorptive capacity, an important dynamic capability involving the acquisition, assimilation, transformation and exploitation of knowledge, this paper highlights the role of a new CEO in emphasizing specific facets of the knowledge management (KM) process to fulfill expected strategic mandates.

This paper presents a conceptual framework that underscores the importance of CEO succession as a knowledge enabler by depicting its influence on the various dimensions of absorptive capacity. To this end, this paper develops an integrated set of propositions that unpack the influence of different types of CEO successions that trigger and enable different KM processes involved dimensions of absorptive capacity.

The theoretical framework presented in this paper suggests that given a certain succession context (forced or voluntary turnover of predecessor) different types of CEO succession, combined with possible executive turnover, will constitute a reorientation in top management experience and expertise. This will in turn trigger certain dimensions of absorptive capacity (potential or realized), to fulfill specific strategic mandates such as strategic change or strategic continuity.

This paper presents a theoretical framework that underscores the importance of studying CEO succession in conjunction with their influence on different knowledge dimensions of absorptive capacity. CEO succession (and subsequent changes in top management team composition) is suggested to be a knowledge enabler. Based on the context of CEO turnover (forced vs voluntary) and the amount of change undergone in TMT composition, different types of CEO succession (based on their origin) are suggested to have different challenges to overcome and different strategic mandates to fulfill. Fulfilling these strategic mandates will require an emphasis on different facets of the KM process, which is encompassed in the dimensions of absorptive capacity. This will, in turn, resolve questions about which knowledge activities the organization needs to invest its resources in and resources allocation decisions may become easier.

Based on their origin, three kinds of CEO succession have been described in this paper – insider-follower, insider-contender and outsider succession. Each of these types of succession encounter different challenges and are expected to fulfill different kinds of strategic mandates. Accordingly, this paper proposes that each kind of CEO succession trigger and enable the knowledge components of absorptive capacity (knowledge acquisition, knowledge assimilation, knowledge transformation and knowledge exploitation) in different manners. This will in turn, allow firms to prioritize the allocation of resources toward different kinds of knowledge activities related to absorptive capacity.

This paper suggests that the CEO succession event, although broadly discussed in management research, has been overlooked when it comes to KM in organizations. Given that strategic leadership is one of the powerful enablers of organizational practices and outcomes, this paper emphasizes that different types of CEO succession may be able to influence the KM process by enabling the different dimensions of absorptive capacity (potential and realized).

This paper aims to examine the effect of contractual factors and noncontractual factors on tax avoidance (TA).

The sample comprises 400 firm-year observations of 67 companies listed on the HDAX during the period 2008–2017. The generalized least square panel regression is applied.

The study results confirm a significant effect of long-term chief executive officer (CEO) compensation incentives and CEO attributes on TA. Findings exhibit a significant impact of foreign CEO on TA, whereas an insider CEO mitigates TA. The results hold for several robustness tests, with lag effective tax rate as dependent variable and with splitting foreign CEO into European and non-European origin.

First, the sample is limited to 400 firm-year observations and to the German context. For shareholders, the study provides first evidence on relationships between the geographical and internal versus external labor market for CEOs and TA. For researchers, the findings underline the importance of integrating behavioral approaches like place attachment theory and the rooting theory in the theory of TA.

To the best of the authors’ knowledge, this is the first study to examine the impact of both contractual determinants and behavioral determinants on TA in the German context as an emerged economy with a dualistic corporate governance. This study contributes to the existing literature regarding the scientific debates about the impact of CEOs and CEO attributes on TA. It also analyses the balance between the place attachment theory and the rooting theory in the face of the compensation outcomes of agency theory.