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CEO outsiderness and firm performance in an emerging economy: The moderating role of managerial discretion

Published online by Cambridge University Press:  20 June 2018

Aylin Ataay
Aylin Ataay*
Affiliation:
Management Department, Galatasaray University, Istanbul, Turkey
*
Corresponding author: aylin.ataay@gmail.com
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Abstract

Inconsistent findings from prior research on the performance consequences of new Chief Executive Officer (CEO) origin led us to study the moderating effect of managerial discretion on the link between CEO outsiderness and firms’ post-succession performance. Data from 75 CEO succession events from an emerging economy show that new CEO outsiderness, without managerial discretion context influences, has no direct impact on post-succession performance. Further, our findings emphasise the moderating impacts of managerial discretion, stemming from factors in a company’s external and internal contingencies, which either strengthen or weaken the association between new CEO outsiderness and post-succession firm performance. It is found that market complexity, but not munificence, provides CEOs with more discretion in the Turkish context, thus strengthening the positive associations between CEO origin and firm performance. Firms inertia weakens both managerial discretion level and the association between CEO outsiderness and firm performance. The results show that internal corporate governance also matters. Finally, when a CEO assumes the dual role of both the chairman and the CEO, the link between CEO outsiderness and performance of the firm becomes stronger.

Keywords

CEO successionnew CEO outsidernessmanagerial discretionemerging economy
Type
Research Article
Information
Journal of Management & Organization , Volume 26 , Issue 5 , September 2020 , pp. 798 - 814
Copyright
Copyright © Cambridge University Press and Australian and New Zealand Academy of Management 2018

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