Balancing Stability and Fresh Perspectives: The Parabolic Impact of CEO Tenure on Sustainable Performance
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2023-06-29
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en
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The research field of CEO turnovers and financial performance received a large body of attention over the past decades and there has been a significant shift in the level of attention and importance placed on sustainable performance (e.g., Kramer & Pfitzer., 2022; Sautner, Z., 2021). Yet the relationship between CEO turnovers and sustainable performance remains in its nascent stage. This research aims to extend the research field on this subject by using a panel data analysis for 516 firms included in the S&P500 between 2002-2021 to investigate the relationship between sustainable performance and a firm’s (I) change in CEO, (II) CEO tenure, (III) turnover orientation (internal/external), and their respective sustainable performance. The results show that (I) the impact of a CEO turnover on a company’s sustainable performance is overshadowed by other factors, (II) CEO tenure has a positive and parabolic effect on sustainable performance, reaching its peak after 8 years and 4 months, and (III) companies who claim to favor internal promotions over external promotions have significantly higher levels of sustainable performance. These findings show that long, though not excessively long, CEO tenures, combined with internal promotion policy, strengthen sustainable performance.
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Faculteit der Managementwetenschappen