Executive Succession and Performance of European Listed Companies: The Mediating Role of <scp>ESG</scp> Performance

ABSTRACT This article analyzes the impact of executive succession on the financial performance of European companies in the STOXX 600 between 1999 and 2022, incorporating the mediating role of ESG performance. The study is based on a generalized structural equation model with a time lag and shows that succession has no significant direct effect on financial performance. However, there is a positive indirect effect through ESG performance. This paradoxical result can be explained by a dual mechanism. On the one hand, succession tends to reduce ESG performance. On the other hand, high ESG performance has a negative impact on profitability. Managers therefore temporarily adjust their ESG policies in order to restore immediate profitability and stabilize market perception. The study contributes to the literature by articulating the logic of disruption, adaptation, and strategic arbitrage, and shows that post‐succession performance depends less on the change in leadership than on the strategic adjustments made during the transition.