Working Paper: CEPR ID: DP16281
Authors: Dirk Jenter; Peter Cziraki
Abstract: We study the market for CEOs of large publicly-traded US firms, analyze new CEOs’ prior connections to the hiring firm, and explore how hiring choices are determined. Firms are hiring from a surprisingly small pool of candidates. More than 80% of new CEOs are insiders, defined as current or former employees or board members. Boards are already familiar with more than 90% of new CEOs, as they are either insiders or executives who directors have previously worked with. There are few reallocations of CEOs across firms - firms raid CEOs of other firms in only 3% of cases. Pay differences appear too small to explain these hiring choices. The evidence suggests that firm-specific human capital, asymmetric information, and other frictions have first-order effects on the assignment of CEOs to firms.
Keywords: CEO labor markets; CEO-firm matching; assignment models; CEO compensation
JEL Codes: G34; D22; M12; M51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| firm-specific human capital (J24) | CEO hiring decisions (M12) |
| asymmetric information (D82) | CEO hiring decisions (M12) |
| familiarity with candidates (K16) | CEO hiring decisions (M12) |
| limited candidate pool (J79) | CEO hiring decisions (M12) |
| CEO hiring decisions (M12) | efficiency of CEO assignments (M12) |
| CEO hiring decisions (M12) | CEO pay (M12) |