| Article ID | Journal | Published Year | Pages | File Type |
|---|---|---|---|---|
| 958166 | Journal of Economics and Business | 2013 | 31 Pages |
We investigate empirically a market-based explanation for the rise in recent years in external CEO hiring and compensation and find, consistent with the market-based theory, that firms in industries relying on general managerial skills are more likely to hire CEOs externally than firms in industries relying less on such skills. We show that firms relying on internal CEOs have on average higher profits than external-CEO firms and that the difference in profits decreases as general skills become more important in the industry. We relate managerial skills to compensation and show that CEO general skills induce better firm performance and higher compensation.
► We investigate empirically a market-based explanation for the rise in recent years in external CEO hiring and executive compensation. ► We find that firms relying on internal CEOs have on average higher economic profits than external-CEO firms, and the difference in profits decreases as general skills become more important in the industry. ► We relate managerial skills to compensation and show that CEO general skills induce better firm performance leading to greater CEO compensation.
