CEO successions in times of decline and prosperity: restoring aspiration and performance implications in family firms

Purpose The aim of this paper is to develop and test a behavioral theory of chief executive officer (CEO) succession and its performance consequences in family firms. Building upon performance feedback and slack research, the study hypothesizes that the effect of selecting a non-family outsider CEO on post-succession firm performance is contingent upon pre-succession firm performance aspirations level and the available slack resources. Design/methodology/approach The hypotheses are tested using a panel of 430 CEO successions in Italian family firms. Findings The findings show that a non-family outsider CEO is particularly valuable when performance resides far below aspiration levels, and there is a high availability of slack resources. Originality/value The study provides novel insights of the benefits and drawbacks of selecting non-family outsider CEOs offering behavioral-based theoretical explanations of performance consequences of CEO successions.