Stepping into Ill-Fitting Shoes: Local Status Contrasts and Acquisitiveness of New CEOs
Published: 17 January 2022
Abstract: This paper asks what motivates new chief executive officers (CEOs) to engage in an acquisition spree despite the considerable risk it entails to themselves and their firms. Building on status theory and performance feedback theory, we theorized that status distance between new CEOs and their predecessors explains the empire-building behavior of new CEOs early in their tenure. Because of the uncertainty surrounding a CEO’s quality early in the individual’s tenure, status serves as a signal of quality for the new CEO. Hence, CEOs had to rely on status signals to maintain or close the status gap between them and their predecessors. Drawing on performance feedback theory, we theorized that new CEOs’ status contrast relative to their predecessor influences their acquisitive behavior. Our examination of the acquisition behavior of 429 new CEOs of S&P 500 firms in the United States revealed that relatively low-status CEOs engaged in risk-taking to improve their status, but relatively high-status new CEOs engaged in risk-taking to maintain their lead. It also revealed that new CEOs changed their risk-taking behavior when direct evidence of their quality or that of their predecessors deviated from the underlying quality expectations indicated by their relative status position.
Keywords: behavior / Building / new CEOs / engaged / taking / tenure / predecessors / status
Scifeed alert for new publicationsNever miss any articles matching your research from any publisher
- Get alerts for new papers matching your research
- Find out the new papers from selected authors
- Updated daily for 49'000+ journals and 6000+ publishers
- Define your Scifeed now
Click here to see the statistics on "Strategy Science" .