This paper assesses how CEO transitions shape labor contracts within firms. We argue that family links between a new CEO and his predecessor act as a commitment device for upholding implicit contracts with the workforce. Consistent with this view, we find evidence of a wage insurance mechanism during a CEO transition. Dynastically-promoted CEOs relative to external CEOs are associated with up to 25% less job separations and 20% lower wage growth. Crucially, we show that differences, in terms of job separations, between dynastic and non-dynastic CEO successions are significantly greater when labor markets are more frictional.

CEO identity and labor contracts: evidence from CEO transitions

SERRANO-VELARDE, NICOLAS ANDRE BENIGNO
2015

Abstract

This paper assesses how CEO transitions shape labor contracts within firms. We argue that family links between a new CEO and his predecessor act as a commitment device for upholding implicit contracts with the workforce. Consistent with this view, we find evidence of a wage insurance mechanism during a CEO transition. Dynastically-promoted CEOs relative to external CEOs are associated with up to 25% less job separations and 20% lower wage growth. Crucially, we show that differences, in terms of job separations, between dynastic and non-dynastic CEO successions are significantly greater when labor markets are more frictional.
2015
2015
Bach, Laurent; SERRANO-VELARDE, NICOLAS ANDRE BENIGNO
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11565/3985541
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