When a new chief executive takes charge of a company, uncertainty quickly spreads through the financial markets. Among the most attentive observers are financial analysts, who meet regularly with senior leaders and shape the investment decisions of major institutional investors. These analysts look for early signals that help them understand how the firm may change under new leadership, and they are particularly alert to the timing and substance of a CEO’s first major strategic announcement. That initial communication often becomes a reference point for expectations about the organisation’s future, even though the new leader may still be getting to grips with internal realities.
Existing research offers mixed conclusions about whether speed or patience serves new CEOs best. Some studies suggest that moving quickly reassures markets and demonstrates authority, while others argue that deliberate pacing reduces the risk of costly mistakes. A recent study from the University of Notre Dame seeks to reconcile these views by introducing the concept of “new CEO strategic action speed”. This term refers to the number of days it takes a newly appointed CEO to announce the firm’s first large-scale strategic action, providing a measurable way to assess how timing affects external perceptions.
The study is led by John Busenbark, an associate professor at Notre Dame’s Mendoza College of Business. In an article titled Moderately Fast and Furious: A Screening and Behavioral Theory of New CEO Strategic Action Speed, forthcoming in the Academy of Management Journal, Busenbark argues that analysts interpret the speed of early strategic action as information in itself. Rather than favouring speed or delay outright, analysts assess timing in light of the situation the CEO inherits.
Working with colleagues from the University of Nebraska-Lincoln and the University of Texas at Arlington, Busenbark finds that context is decisive. When a leadership transition is smooth and the firm is performing reasonably well, analysts generally welcome quicker strategic signals. Early announcements help them clarify the company’s outlook and pass that insight on to clients. By contrast, when a CEO is appointed during a period of turmoil or arrives with limited knowledge of the organisation, analysts tend to value a brief pause that allows the leader to understand the firm’s challenges and constraints.
That tolerance is not unlimited. The study shows that analysts’ reactions begin to turn negative once the wait for a strategic announcement extends beyond roughly 35 days. After that point, delays are increasingly interpreted as hesitation or a lack of direction. This finding is particularly striking given that most new CEOs wait well over 200 days before revealing their first primary strategy, far longer than analysts typically consider reasonable.
Drawing on data covering CEO appointments between 2005 and 2019, strategic announcements reported in business newswires, and thousands of earnings call transcripts, the researchers show how eager analysts are for early clues about direction. Questions about plans are common, yet often deflected. The study concludes with practical guidance for new CEOs: those entering turbulent situations should take some time to learn, but not so long that silence undermines confidence. Striking the right balance between learning before leading and acting promptly appears crucial for maintaining credibility in the eyes of the market.
More information: John Busenbark et al, Moderately Fast and Furious: A Screening and Behavioral Theory of New CEO Strategic Action Speed, Academy of Management Journal. DOI: 10.5465/amj.2024.0829
Journal information: Academy of Management Journal Provided by University of Notre Dame