10.5465/AMBPP.2015.57 SUCCESSOR CEO FUNCTIONAL AND EDUCATIONAL BACKGROUND: INFLUENCE OF PREDECESSOR CHARACTERISTICS AND PERFORMANCE ANTECEDENTS EAHAB ELSAID Odette School of Business University of Windsor Windsor ON N9B3P4 BRADLEY W. BENSON Ball State University DAN L. WORRELL University of Arkansas INTRODUCTION There has been little research on how boards actually select successors, despite the belief held by many that selecting the CEO is the most important decision that a board of directors makes (Larcker et al., 2014). The available research suggests that where the hired CEO is from (i.e., industry or inside/outside the firm) matters, so it is reasonable to expect that CEO experience matters (Datta and Rajagopalan, 1998). Thus, CEO background is important to boards when they make succession decisions, but research has not definitively quantified how boards select successors and how they determine if a successor will fit the company’s needs. One of the contributions of our study is that we look at firm characteristics as being motivators for the CEO hires. That is to say, we take the firm characteristics as the determinants rather than the outcome of hiring decisions. Another contribution of our study is that we highlight the CEO background (functional and educational) instead of focusing on the dichotomous succession origin. We address two research questions. Do boards consider CEO educational and functional background when choosing a new CEO? What factors determine whether the board of directors will seek an incoming CEO with a different educational and/or functional background from that of the current CEO? BACKGROUND, MOTIVATION, AND DEVELOPMENT OF HYPOTHESES CEO Educational Background There are two branches of research when it comes to the topic of how CEO education influences the firm. The first branch of research examines the relation between the type of education of the CEO and the behavior of the firm. The second branch of research investigates the relation between the selectively of the CEO’s education and firm performance. Bhagat et al. (2010) find that, while CEO education appears to play an important role in the hiring of CEOs, it does not affect the long-term firm performance. CEO Functional Background