Graduation Year

2025

Date of Submission

12-2024

Document Type

Open Access Senior Thesis

Degree Name

Bachelor of Arts

Department

Economics

Reader 1

Darren Filson

Terms of Use & License Information

Terms of Use for work posted in Scholarship@Claremont.

Rights Information

2025 Amanda Dee

Abstract

The informational technology (IT) industry is one of the most dynamic industries, and the CEO plays a crucial role in steering innovation. The dependence on innovation is associated with dynamics that bring heightened volatility and force firms and their CEOs to confront significant challenges, particularly when navigating periods of substantial reductions in value. I define distress as three-year cumulative returns that are negative and underperform the market by more than 30%. Firms that meet this criteria during 2010-2017 are analyzed using regression models to assess how CEO change influences the likelihood of their recovery, defined as achieving nine-year cumulative returns—including three-year periods of distress, reorientation, and recovery—where the inflation-adjusted value recovers or surpasses pre-distress levels. I hypothesize that CEO change, permanent CEO appointments, and external CEO appointments each increase the likelihood of firm recovery after a period of distress. Results indicate inconclusive evidence for the overall impact of CEO changes on recovery but highlight key interactions between appointment type—interim or permanent— and hiring origin—internal or external. Internal permanent CEO appointments are most strongly associated with recovery, while internal interim and external permanent CEOs show weaker positive links. In contrast, external interim appointments are linked to a lower likelihood of recovery. When evaluating the conditions under which firms address distress through CEO changes, firms in more severe distress are significantly more likely to appoint internal CEOs, indicating a preference for internal expertise during critical periods.

Share

COinS