Does experience matter? the relationship between CEO experience, origin, and post-succession firm performance

Abstract

The appointment of a Chief Executive Officer (CEO) is among the most critical decisions faced by boards of directors as it influences strategy and firm performance. Poor CEO selection has been shown to result in significant value destruction. Building on the Upper Echelons Theory (UET), this research investigates the relationship between CEO experience and post-succession firm performance, and whether this relationship is moderated by origin (insider vs. outsider) or rookie status. The research question is to test whether experience matters. Significant research has been done in the area of succession and executive background. This research contributes to the literature by testing the relationships identified by scholars in an emerging market context and extending the definition of breadth of experience as well as introducing a little researched concept of leapfrogs. A quantitative approach was employed, using data collected from JSE-listed company succession events between 2015 and 2022. The hypotheses were tested using regression analysis to test the relationships and build the existing body of literature. Insights were obtained from the research indicating the existence of a relationship and a moderation. This study provides insights for practictioner navigating succession decisions, emphasising the importance of aligning CEO capabilities with organisational needs.