Does prior CEO experience lead to superior performance?

Abstract: In this study, we investigate how appointing a CEO with prior experience from the CEO position affects post-succession firm performance in Swedish SMEs, compared to appointing a first-time CEO. This is the first study to investigate this relationship in SMEs and in a non-US setting. Apart from impacting firm performance, we also hypothesize that CEO experience impacts the hiring decision of firms, specifically that worse performing firms hire CEOs with prior CEO experience to a larger extent. We examine these relationships by running ordinary least squares regressions on a sample of 154 CEO succession events in Swedish SMEs between 2007-2017. Contrary to studies made on large US firms, we find no empirical evidence for any relationship between prior CEO experience and firm performance in Swedish SMEs. Neither do we find any support for the hypothesis that bad performing firms hire exCEOs to a larger extent. Ultimately, we argue that our study serves as a first indication of the impact of CEO experience on firm performance in SMEs and could provide inspiration for further research in this area.