Interim CEO successions: implications for CEO successor selection and subsequent firm performance

Prior research highlights that interim CEO successions are disruptive for firms.Yet boards appoint interim CEOs in order to focus on finding the right person to take overpermanently, suggesting they may offer benefits to CEO selection. Considering these twoviews, this paper compares the firm performance of CEOs appointed following an interimperiod with that of CEOs appointed in a direct succession. We argue that, owing to the dis-ruption caused by the interim appointment, firm performance under a CEO appointed fol-lowing an interim period will be poorer than under a CEO appointed in a directsuccession. However, we posit that, in circumstances in which obtaining and processingthe information relevant to CEO selection is more difficult, the interim period may be parti-cularly helpful in selecting the most fitting successor and ultimately weakening the associ-ated performance penalty. Using a sample of CEO successions that occurred in S&P 1500firms between the years 2002 and 2016, we find general support for our hypotheses. Thispaper, thus, demonstrates that the subsequent performance consequences of appointing aninterim CEO depends on the difficulty of selecting the firm’s next permanent CEO.