The longer CEOs stay in power, the more likely chief executives are to limit outside sources of market and customer information, ultimately hurting firm performance.

Executive Summary

As CEOs accumulate knowledge and become entrenched, they rely more on their internal networks—employees—for information, growing less attuned to market conditions and customers, according to researchers who say the optimal CEO tenure is less than five years.

A new study suggests that most CEOs exceed the optimal tenure length by about three years, and examines why a longer CEO tenure may not always produce positive results for firm performance. It is titled, “How does CEO tenure matter? The mediating role of firm-employee and firm-customer relationships.”

The researchers, Charles Gilliland Professor of Marketing Xueming Luo and PhD candidate Michelle Andrews of the Fox School of Business at Temple University and PhD candidate Vamsi K. Kanuri of Robert J. Trulaske, Sr. College of Business at the University of Missouri, explored two primary stakeholders—employees and customers—who are influenced by CEO tenure.

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