What’s All That (Strategic) Noise? Anticipatory Impression Management in CEO Succession

Abstract

We develop and test a novel theory about strategic noise with regard to CEO appointments. Strategic noise is an anticipatory and preemptive form of impression management. At the time it announces a new CEO, a board of directors seeks to manage stakeholder impressions by at the same time releasing confounding information about other significant events. Several CEO and firm characteristics affect the likelihood that this will happen. Strategic noise is most likely for very long-term CEOs with a wide pay gap between other top managers at high stock price performance firms, and when a new CEO does not have previous CEO experience or comes from a less well-regarded firm. Results showing that CEO succession announcements are noisier than they would be by chance have some interesting implications for impression management theory, traditional event study methodology, and managerial and public policy. Interviews with public firm directors on CEO succession provide additional validity for the strategic noise construct and help us to articulate key elements of the theory.