Are New CEOs Reshapers? Measuring CEOs’ Role in the Accumulation of Organizational Capital

We study whether and how new CEOs reshape their organizations by increasing the firm’s “organizational capital.” We develop and externally validate a novel measure of organizational capital using a word-embedding model. We decompose organizational capital into four dimensions (i.e., Culture, Alignment, Leadership, and Teamwork). We find that, although on average new CEOs do not alter the organizational capital of the firms they take over after a leadership transition, those who do so bring better financial performance and non-financial performance to their organizations, especially in the long run. We also find some evidence on what characteristics of new CEOs make them more likely to increase the accumulation of their firms’ organizational capital