Relational Ownership and CEO Continuity: A Property Rights Perspective

Inspired by agency theory, research on Chief Executive Officer (CEO) succession often focuses on turnovers as a mechanism to discipline CEOs in the event of poor firm performance. Recent research extends this view by showing that CEO turnovers can also lead to substantial disruption in a firm's management. Less is known, however, about the antecedents of disruption and continuity in the context of CEO turnovers. Drawing on modern property rights theory, we investigate how CEO continuity varies across different types of firms. Using a sample of Swiss publicly traded firms, we find that relational ownership enhances the likelihood of CEOs staying in office or moving to the position of board chair. Firms with little relational ownership, in contrast, display a high degree of CEO continuity only when capital intensity is high. Provided that a CEO turnover occurs, relational ownership and capital intensity reduce the likelihood of interim CEO successions. These findings highlight the importance of a nuanced view of CEO continuity, taking into account owner types as well as contextual factors.