2024 - Volume 27, Issue 1

Analyzing The Impact Of CEO Succession Via Hierarchical Disturbance On Firms’ Growth Life Cycle: A Moderating Role Of Agency Cost

By Dongling WANG, Pablo Ruiz PALOMINO, Lucian-Ionel CIOCA and Syed Ghulam Meran SHAH

Abstract: The current study investigates the effectiveness of CEO succession via hierarchical disturbance on firms’ growth life cycle. Significantly, the paper use 2SLS and GMM panel regression techniques to analyse the data of Chinese listed firms for the years 2017-2021. Explicitly, threelevel of this specific CEO succession was categorized through contemplating the hierarchy of the corporate board. Conclusively, the three types of CEO succession via hierarchical disorder positively boost the cash flow operating (CFO), and cash flow financing (CFF) while decelerate the capital flow investment (CFI). CEO succession via hierarchical disorder intensity was formulated which accelerates the CFF and CFF while deterring the CFI. Conclusively, the moderating role of agency cost accentuates that it is detrimental for the cash flow investment. Specifically, aged CEO successor via hierarchical disturbance was examined as a deterrent vehicle for all types of cash flows (CFO, CFI and CFF). Additionally, total assets and earnings per share are positive indicators of the growth life cycle of the firms. Implicatively, the current study recommends in case of inevitability of forceful succession, the young incumbent CEO should be preferred to maintain the firms’ growth cycle.

Keywords: CEO succession, Hierarchical disturbance, Firms ‘Growth life cycle, Agency cost, Cash flow operating, Cash flow financing, Cash flow investment, Panel regression technique

JEL codes: G30, G34, G39

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