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The Dilemma of Moving Fast: The Antecedents and Consequences of Outside CEOs’ Early Action Plans

Time:2017-05-24 15:22:30  Hits:[]

Prior research in CEO succession literature has documented a well-known dilemma for the newly appointed CEOs with outside origin: they are selected when the board and other constituents desire a quick turnaround, yet outside CEOs usually lack firm-specific information and necessary power base to initiate effective changes in a short period. While the dilemma is well documented in the prior literature, little is known about how outside CEOs deal with the dilemma and how their behaviors are evaluated by important constituents. In this study, I propose that the outside CEO’s early action plans, defined as the verbal description of actions that have been accomplished and are about to be taken by the new CEO in his or her early-stage communication with important constituents, represent an important way to deal with the dilemma. I further examine how such early action plans are evaluated by a specific group of important constituents: the investment analysts. I argue the outside CEO’s early action plans will improve the investment analysts’ post-succession recommendation change of the firm’s stock as such plans shows that the CEO behave consistently with the going-in mandate. Finally, I examine whether the positive relationship between the amount of early action plans and post-succession investment analysts’ recommendation change is moderated by the outside new CEO’s prior experience.
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