Demographic Characteristics of Board Directors as Determinants of New CEO Selection

There are relatively few research papers investigating CEO selection process although they logically connect studies of CEO turnover factors and studies of CEO characteristics – company performance relationship. Understanding factors board of directors consider while selecting new CEO, we can predict the chances of each candidate to be chosen. Then based on most probable candidate characteristics we can predict future company performance. Summing up these results we can also judge about Agency problem presence. Authors of this study assume that selection of new CEO depends on board of director members’ age. The basis of such assumption is «Attraction–selection–attrition» theory (Schneider, 1987), which say that corporation primarily hire individuals whose personal characteristics are similar to current worker’s characteristics. Hypothesis of this study state that the higher average board of director members’ age, the older selected CEO will be and the higher new CEO - board age similarity, the higher company’s stock returns will be. All hypothesis are accepted and proved. The conclusion of this study is that board of director select CEOs with age similar to their own and it has positive relationship on company value.