Ishak, Rokiah and Ku Ismail, Ku Nor Izah and Abdullah, Shamsul Nahar
(2012)
Determinants Of Internal Vs. External
Ceo Successions In Malaysian Public
Listed Companies.
Asian Academy of Management Journal (AAMJ), 17 (2).
pp. 1-18.
ISSN 1394-2603
Abstract
Following a CEO turnover, a company may select an internal or external successor. The
objective of this study is to determine if firm performance, board attributes, ownership
structure and incumbent power influence the decision of whether to elect an internal or
external candidate. Results from logistic regression analysis on 145 succession events
over a four-year period (2002 to 2005) indicate that firms which are controlled by
blockholders tend to select an outsider as the successor. Further, firms that are
controlled by family members and position their former CEOs within the firms are more
likely to select insiders as successors. However, firm performance, board composition,
CEO duality and turnover type do not affect the selection choice. This study implies that
poor firm performance does not necessarily lead to outside CEO selection choice.
Further, boards of Malaysian PLCs are not effective in choosing outsiders as successors
as both board composition and CEO duality do not necessarily select outsiders to become
new CEOs. Another implication of this study is that former CEOs who continue their
directorship in the same companies do have some power in naming new CEOs as the
former tend to select insiders as successors.
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