Do new CEOs really care about innovation?

Abstract

This study asks whether new chief executive officers (CEOs) care about innovation postturnover. Using a large sample of Chinese listed firms between 2008 and 2019, our identification strategy relies on the exogenous variation in CEO turnovers. Our difference-in-difference estimates indicate that new CEOs improve R&D efficiency and generate more and higher quality patents. We further show that this positive effect is more pronounced when CEOs have longer career horizons and overseas experience. Overall, our findings indicate that CEO turnover represents an effective mechanism for fostering innovation and new CEOs indeed care about innovation. Our results could benefit several groups of stakeholders with respect to CEO selection process.