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When Is an Outsider CEO a Good Choice?

Authors, Ayse Karaevli (Sabanci University's School of Management in Istanbul) and Edward J. Zajac (Northwestern University's Kellogg School of Management in Evanston, Illinois), conducted a detailed empirical investigation of the performance and strategic change consequences of CEO succession in 90 single-business organizations over 30 years (1972- 2002), using two contrasting environmental situations in terms of turbulence and growth/ munificence: the U.S. airline and chemical industries.
The authors also examined the changes in post succession performance by creating a composite measure that standardizes and then sums the change in two operational performance indicators, industry-adjusted return on assets and industry- adjusted return on sales, along with a market-based performance indicator, industry- adjusted total shareholder return. Their research suggests that outsiders outperform insiders at companies with a recent history of poor performance.
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