Seeking Common Ground or Differences: Research on the Impact of Human Capital Difference between Former and Successor CEOs on Corporate Strategic Change

Abstract

Abstract: As the decision maker and direct manager of the company, the CEO needs to guide the formulation and implementation of the company strategy according to the changes in the internal and external environment of the company at the right time, so as to lead the company to gain competitive advantage in the industry competition. The incumbent CEO, due to his or her long tenure, is influenced by the long-term development practice of the company and other factors, and his or her knowledge of the internal and external environment of the company is limited, so it is difficult for him or her to make changes to the company strategy, thus the CEO succession becomes an important way for the company to realize strategic changes. In company practice, the selection of a successor CEO often requires full consideration of many factors such as the state of the company before the change and the reasons for the previous CEO's departure. Based on the data of A-share listed companies in China from 2007 to 2020, this paper re-examines the impact of CEO succession events on company strategic change from the perspective of predecessor-successor CEOs' human capital differences. Both predecessor and successor CEOs are included in the study of CEO succession events, and both the influence of the predecessor CEO's departure and the successor CEO's power in the succession events are considered.
The research results are as follows: First, according to the upper echelon theory, managers' cognitive level and decision-making style are affected by their knowledge level and life experience. Differences between individuals lead to different decisions. The greater the predecessor-successor CEOs' human capital difference, the greater the degree of the company's strategic change after the succession event, i. e., there is a positive relationship between the predecessor-successor CEOs' human capital difference and the strategic change in the company. Second, the power of the successor CEO means the ability to adjust the business and guarantee the development and implementation of the new strategy after the succession, and when the power of the successor CEO is greater, the stronger the positive relationship between the human capital difference of the predecessor-successor CEOs and the company's strategic change. The power of the successor CEO can strengthen the positive relationship between the human capital difference between the predecessor-successor CEOs and the company's strategic change. Finally, the predecessor CEO staying as the chairman of the board of directors means that the predecessor CEO still has the will to participate in company's decision making and can get the support of the company, and the successor CEO tends to take avoidance measures when he or her is under the pressure of rank. However, the predecessor CEO is far away from the business of the company, which leads to less strategic sensitivity and reduces the possibility of strategic change. This effect is affected by the nature of the company: in private enterprises, the predecessor CEO staying as the chairman inhibits the positive relationship between the predecessor-successor CEOs and the strategic change; in state-owned enterprises, when the predecessor CEO stays as the chairman, the choice of the successor CEO is most likely to be influenced by the predecessor CEO, and then the predecessor-successor CEOs' human capital difference tends to be smaller, so the company is less likely to make strategic changes. The results of further analysis show that in the segmentation dimension of CEO human capital, differences in educational background, legal background and financial background are the key elements that influence the company's strategic change.
The findings of this paper have important implications for CEO succession practices in China. First, when a company wants to make strategic changes, it should choose a successor CEO who has great difference from the predecessor CEO in terms of human capital, and pay particular attention to the differences in educational, legal, and financial backgrounds among the many factors that constitute the CEO's human capital. Second, the power of the successor CEO can affect his or her decision-making position. Therefore, when practicing strategic changes, companies should give the successor CEO a certain amount of discretionary power, and the more power the successor CEO has, the better it is for the successor CEO to promote strategic changes. Finally, in private enterprises, the predecessor CEO staying as the chairman will be detrimental to the strategic change of the enterprise, so enterprises should carefully consider the predecessor CEO staying as the chairman.

Key words: Human Capital Difference Between Former and Successor CEO, Strategic Change, The Former CEO Stayed on as Chairman, The Saccessor CEO Power

摘要： 基于中国2007—2020年A股上市公司数据,探究前任继任CEO人力资本差异对企业战略变革的影响,并考察了前任CEO留任董事长以及继任CEO权力对于二者关系的调节作用。研究发现:前任继任CEO人力资本差异与企业的战略变革正相关;在民营企业中,前任CEO留任董事长会弱化前任继任CEO人力资本差异与战略变革的正相关关系;继任CEO的权力能够加强前任继任CEO人力资本差异与企业的战略变革之间的正相关关系。进一步分析显示,在CEO人力资本的细分维度,教育背景、法律背景和金融背景是影响战略变革的关键要素;按照产权性质细分样本后进行分析,结果显示前任继任CEO人力资本差异对民营企业战略变革的影响依然显著,但在国有企业样本中该影响不显著。本研究在丰富企业战略变革影响因素研究的同时,为中国企业CEO继任的选聘提供了参考。

关键词: 前任继任CEO人力资本差异, 战略变革, 前任CEO留任董事长, 继任CEO权力

CLC Number:

MA Yufei, ZHOU Jian, YUAN Dongliang. Seeking Common Ground or Differences: Research on the Impact of Human Capital Difference between Former and Successor CEOs on Corporate Strategic Change[J]. Collected Essays on Finance and Economics, 2022, 38(12): 81-92.

马雨飞, 周建, 原东良. 求同抑或寻异:前任继任CEO人力资本差异对企业战略变革的影响研究[J]. 财经论丛, 2022, 38(12): 81-92.

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