The Market for CEOs

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Abstract

We study the market for CEOs of large publicly traded US firms, analyse new CEOs’ prior connections to the hiring firm, and explore how hiring choices are determined. Firms are hiring from a surprisingly small pool of candidates. More than 80% of new CEOs are insiders, defined as current or former employees or board members. Boards are already familiar with more than 90% of new CEOs, as they are either insiders or executives who directors have previously worked with. There are few reallocations of CEOs across firms – firms raid CEOs of other firms in only 3% of cases. Pay differences appear too small to explain these hiring choices. The evidence suggests that firm-specific human capital, asymmetric information, and other frictions have first-order effects on the assignment of CEOs to firms.

Biography

Dirk Jenter is a Professor of Finance at the London School of Economics and was previously on the faculty of Stanford University and MIT. He is a Research Associate of the CEPR, a Research Member of the ECGI, and a former Research Fellow of the NBER. His research focuses on corporate governance, the selection and compensation of top executives, mergers and acquisitions, and all interactions of firms with investors and capital markets. His work has been published in all top finance journals, has received numerous research awards, and has been featured in the Financial Times, the Wall Street Journal, the Economist, Financial Executive Magazine, Smart Money, and on CNN. He is an Associate Editor of the Journal of Finance and has served on the AFA’s Nominating Committee, on the Executive Committee of the European Finance Association, and as an Associate Editor of the Review of Financial Studies. He holds an M.Phil. degree in Economics from the University of Cambridge and M.A. and Ph.D. degrees in Business Economics from Harvard University.

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