Charles A. Dice Center for Research in Financial Economics

The Market for Comeback CEOs

Rüdiger Fahlenbrach, Bernadette A. Minton, and Carrie H. Pan

ABSTRACT

We study the determinants and valuation consequences of rehiring a former CEO. Rehiring is more likely after poor performance of the current CEO, if the former CEO performed well during his prior tenure and maintains strong connections to the firm, and the more intangible are the firm’s assets. While the market reacts negatively to the rehiring announcement, the accounting and stock market performances of rehired CEO firms do not differ from those of a control sample over the two years following the turnover. Our evidence suggests that firms rehiring their former CEOs hire the best available candidate given the circumstances.

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