Six Decades of CEO Successions: The Importance of Being an Insider

Spanning six decades of widely varying expectations of CEO behavior, we examine the changing nature of succession patterns in U.S. firms. We investigate how the choice between an internal or external candidate influences strategically critical decisions. We find that firm size, fixed assets, and accounting performance are associated with a greater likelihood of internal appointments. ROA and Tobin’s q are significantly higher for firms with internal CEOs. Internal CEOs prefer to pay dividends, spend less on R&D, but outspend with capital expenditures. Internal CEOs make fewer merger offers, tend to buy larger firms, and pay less often with cash.