Timing CEO Turnovers : Evidence from Delegation in Mergers and Acquisitions

We examine the role of delegation in predicting CEO successions. Using a novel proxy for delegation in mergers and acquisitions, we find that overall CEO turnover rates are about one third higher following deals where the CEO delegates to a senior manager versus deals with no observable delegation. The delegation-turnover relation is strongest when deals are delegated to heirs apparent, the CEO is older, or the delegation decision is unexpected. Voluntary turnovers are more frequent following delegated deals than non-delegated deals, consistent with delegation signaling an orderly succession. The delegation-turnover relation fades over time while other predictors of turnover such as profitability, CEO age, and the presence of an heir apparent in the corporate hierarchy continue to remain significant up to five years after the deal. Our findings suggest that delegation is unique among our predictors of turnover in the sense that it captures near term orderly successions