The Banking and Finance Review

The Impact on Firm Performance: CEO Selection and Product Market Competition

Yuwei Wang

Abstract


I examine the relationship between the change in a firm’s performance and its CEO selection sources: internal promotion versus external hire in both high and low product competition environments. My results show that firms will be better off hiring an outside CEO (external hire) when the firms operate in a low product competition industry. Specifically, the evidence shows that hiring an outside CEO for a firm in a low product competition industry would increase the firm’s performance by about 3% for the entire tenure of the CEO. This paper shows that product market competition is an important factor in CEO selection. 


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