“Timely help” or “one disaster after another”: The impact of potential and transition interim CEO succession on corporate performance

by Conghui Zhao, Xin Guan, Xinyue Wu

The succession mode of interim CEO is highly uncertain. The smooth transition function of interim CEO is particularly important in the process of enterprise reform. We divide interim CEOs into potential successors and transition successors. Then we empirically analyze the heterogeneous impact and mechanism of interim CEOs on firm performance. The results show that compared with transition CEO, potential CEO has less negative impact on corporate performance. Interim CEO has a negative impact on enterprise performance by reducing agency efficiency. The mechanism analysis of this paper are as follows. For the potential CEO, strong incentive constraints can effectively mitigate the negative impact of the succession on corporate performance. For a transitional CEO, superior personal capabilities coupled with an effective oversight mechanism represent more optimal solutions. In today’s corporate landscape, the frequencies of executive changes and interim successions are on the rise annually. Our research is tailored to aid enterprises in navigating these transitions seamlessly and in expediting their recovery processes.