Table 5 Robustness tests: internal...

Table 5

Robustness tests: internal promoted CEOs vs. external hired CEOs

Panel A: CEO trustworthiness and board monitoring structure
Dep =	Bd_Ind		Bd_Female		Bd_Size		Bd_IntM		Bd_RG
	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)
	Inside CEO	Outside CEO	Inside CEO	Outside CEO	Inside CEO	Outside CEO	Inside CEO	Outside CEO	Inside CEO	Outside CEO
Trust_CEO	0.002 (0.002)	−0.008^*** (0.003)	−0.004^*** (0.002)	−0.004^** (0.002)	0.019 (0.034)	0.123^** (0.062)	−0.157^*** (0.033)	−0.175^*** (0.067)	0.082 (0.054)	−0.269^** (0.116)
Observations	12,020	4,181	12,020	4,181	12,020	4,181	12,002	4,157	4,201	1,105
Controls	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
CEO Age Group	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
FE	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Adj./Pseudo R²	0.404	0.525	0.303	0.323	0.614	0.622	0.116	0.133	0.219	0.345

Panel A: CEO trustworthiness and board monitoring structure
Dep =	Bd_Ind		Bd_Female		Bd_Size		Bd_IntM		Bd_RG
	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)
	Inside CEO	Outside CEO	Inside CEO	Outside CEO	Inside CEO	Outside CEO	Inside CEO	Outside CEO	Inside CEO	Outside CEO
Trust_CEO	0.002 (0.002)	−0.008^*** (0.003)	−0.004^*** (0.002)	−0.004^** (0.002)	0.019 (0.034)	0.123^** (0.062)	−0.157^*** (0.033)	−0.175^*** (0.067)	0.082 (0.054)	−0.269^** (0.116)
Observations	12,020	4,181	12,020	4,181	12,020	4,181	12,002	4,157	4,201	1,105
Controls	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
CEO Age Group	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
FE	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Adj./Pseudo R²	0.404	0.525	0.303	0.323	0.614	0.622	0.116	0.133	0.219	0.345

Panel B: CEO trustworthiness, board monitoring activities and CEO incentive alignment
Dep =	Bd_Meet		Moni_Meet		CEO_Incent		CEO_Owner
	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
	Inside CEO	Outside CEO	Inside CEO	Outside CEO	Inside CEO	Outside CEO	Inside CEO	Outside CEO
Trust_CEO	0.062 (0.159)	−0.238^*** (0.083)	−0.013 (0.095)	−0.161^*** (0.059)	−0.010^*** (0.004)	−0.013^*** (0.002)	−0.219^* (0.127)	−0.231^*** (0.084)
Observations	3,402	983	3,402	983	11,988	4,174	9,464	3,390
Controls	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
CEO Age Group	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
FE	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Adj. R²	0.169	0.286	0.196	0.350	0.357	0.360	0.260	0.401

Panel B: CEO trustworthiness, board monitoring activities and CEO incentive alignment
Dep =	Bd_Meet		Moni_Meet		CEO_Incent		CEO_Owner
	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
	Inside CEO	Outside CEO	Inside CEO	Outside CEO	Inside CEO	Outside CEO	Inside CEO	Outside CEO
Trust_CEO	0.062 (0.159)	−0.238^*** (0.083)	−0.013 (0.095)	−0.161^*** (0.059)	−0.010^*** (0.004)	−0.013^*** (0.002)	−0.219^* (0.127)	−0.231^*** (0.084)
Observations	3,402	983	3,402	983	11,988	4,174	9,464	3,390
Controls	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
CEO Age Group	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
FE	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Adj. R²	0.169	0.286	0.196	0.350	0.357	0.360	0.260	0.401

Note(s): This table reports results examining whether our results are stronger for external hired CEOs than internal promoted CEOs. Following Graham et al. (2017), we identify which CEOs are promoted from within the company and which CEOs are hired externally. We compare the date when the executive joins the company and the date he becomes CEO. If this exceeds 12 months, we classify this as an internal promoted CEO, otherwise the CEO is externally hired. We repeat our tests and separately analyze internal promoted CEOs and externally hired CEOs. Panel A examines the impact of CEO on board monitoring structure, while Panel B examines the impact of CEO trustworthiness on board monitoring activities and CEO incentive alignment. See Appendix for variable definitions. All regressions include year, industry, and headquarter state fixed effects. Robust standard errors are clustered at the year and industry level. The standard errors are reported in parentheses. ***, ** and * indicates p-values of 1, 5 and 10%, respectively

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