LawFin Research Seminar: Thomas Keusch (INSEAD)
Title: Activists’ CEOs
Speaker: Thomas Keusch, INSEAD
Prior CEO turnover literature focuses on the decision to oust the incumbent CEO but provides limited insight into CEO recruiting. Using hand-collected data on CEO appointments during hedge fund activism campaigns, this study examines activist involvement in CEO selection. Activist involvement is more likely when there is more uncertainty about desirable CEO characteristics and when the board’s ability to identify CEO candidates from its own network is limited. When activists influence CEO recruiting, directors’ responsibilities in the search process are more clearly defined, more resources are committed to the search and the new CEO is more likely to be recruited from outside the firm. Consistent with activist influence on CEO recruiting being beneficial, it is associated with higher market reactions to CEO appointment announcements, higher future long-run stock returns, and profitability improvements.
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