Overlooked and undervalued: Predecessor CEOs as board chairs in family and nonfamily firms

Appointing the predecessor CEO as board chair after the succession is common in practice, but research has depicted this choice as detrimental to firm performance, mainly because of predecessor CEO entrenchment and power struggles with successors. However, predecessor CEOs can also contribute to post-succession firm performance when using the board chair position to collaborate with their successors. Our study contributes to disentangle the costs and benefits of predecessor retention as board chairs by drawing attention to the role of owner characteristics. We show that family firms benefit more from predecessor retention than nonfamily firms, as evidenced by higher post-succession firm performance for family firms. Within the group of family firms, we find that the positive effect of predecessor retention as board chair is stronger in case the predecessor CEO is the founder and when the successor CEO is a family member or a firm outsider. Together, our findings suggest that we need to take into account owner types to understand the performance impact of board leadership structures and particularly, predecessor CEOs as board chairs.