CEO Dismissal and Succession: The Implications for the Firm’s Strategic Human Capital Resources

Abstract

Purpose: Firms race to attract, develop, and retain their employees to bolster their competitive advantage. Many of these employees choose to leave the firms when they perceive uncertainty following leadership changes. This paper advances arguments for the effects of voluntary and involuntary CEO dismissals on the firm's strategic human capital resources (SHC). These arguments incorporate the impact of factors that influence the impact of CEO dismissals: TMT size, Capital patience, and firm size. These factors lay the grounds for the firm's leadership succession and alleviate the uncertainty associated with these events.
Study design/ methodology/ approach:  The quantitative analysis conducted in this paper utilizes a Generalized Estimating Equation (GEE) model.
Sample and data: The paper utilizes a sample of 1,572 U.S. firms listed in the S&P 1500 between 2008 and 2018. The data was retrieved from various archival sources.
Results: The analysis showed that CEO dismissals led to losses in the firm's SHC. These losses were greater when the CEO was dismissed involuntarily. The loss of SHC following a voluntary CEO dismissal was lower in firms with larger TMT sizes and firm sizes. The loss of SHC following an involuntary CEO dismissal was lower in firms with higher capital patience and larger firm size.
Originality/value: The paper provides evidence of the different effects of voluntary and involuntary CEO dismissal on SHC. Further, it introduces the impact of organizational factors that influence leadership succession in organizations.
Research limitations/implications: The findings presented in this paper has limitation in terms of generalizability to non-U.S. firms and firms that are not listed in the S&P 1500.

JEL classification: M12, M19, M50, M54