Market for CEO talent, determinants and consequences

This paper investigates the rare situations in which the CEO of one firm (old) is hired by another firm (new). We find that a majority of the new firms have recently experienced an involuntary turnover, and most of the old firms replace a departing CEO with an insider. The market reacts negatively to the departure of these CEOs and positively to their hiring by new firms. Our findings suggest that bigger but less profitable firms are able to hire other firms' CEOs. These CEOs receive increased compensation and media visibility after the turnover. The old firms' operating performance decreases significantly after these CEOs leave, while the operating performance of the new firms changes insignificantly.