Moderately Fast and Furious: A Screening and Behavioral Theory of New CEO Strategic Action Speed

CEO successions induce considerable uncertainty for external stakeholders like financial analysts, who eagerly await insight from new CEOs about their first large-scale strategy. But emerging research offers equivocal implications about analyst evaluations of how long new CEOs wait to announce strategy, with conventional theoretical logic contending analysts appreciate expediency and other work suggesting new CEOs benefit from patience. To place this paradigm into sharper view, we build theory about “new CEO strategic action speed,” a construct we introduce constituting the amount of time that passes between the CEO appointment date and the first strategic action announcement. Fusing tenets of screening theory with the behavioral theory of the firm (BToF), we argue that analysts prefer faster new CEO strategic action speeds, except when they expect CEOs to undertake search before charting firm strategy. We specifically theorize that there exists an inverted U-shaped relationship between new CEO strategic action speed and analyst favorability when analysts expect CEOs to engage in greater degrees of search, but there is a negative association when analysts would not expect search. Our theory changes how scholars think about traditional logics from information economics, expands insights from the BToF, and illuminates key considerations for new CEOs.