The Value of an Heir Apparent in Succession Planning

This study examines whether the equity markets value firms that have a succession plan in place. We find that firms with an heir apparent already designated upon the death of the CEO have significantly higher cumulative abnormal returns on the date of death than firms that have not identified an heir apparent. This study contributes to the existing governance/succession planning literature by providing empirical evidence that succession planning appears to be valuable to companies engaged in succession transitions.