This study delves into the critical role of Chief Executive Officers (CEOs) in organizational performance, with a specific focus on the impact of CEO origin (internal vs. external) on the relationship between CEO compensation and firm financial performance. CEOs often draw significant attention and controversy, especially regarding their compensation and the succession process. Our research investigates these aspects, contributing novel insights to both the Resource-Based View (RBV) and CEO succession literature. We analyze a comprehensive dataset of publicly traded companies in the US and Canada, examining the relationship between CEO compensation and firm performance moderated by CEO origin. The study reveals that internally promoted CEOs, compared to externally hired counterparts, differently influence the relationship between CEO compensation and firm performance. Our findings indicate that internally promoted CEOs strengthen the positive relationship between compensation and ROA. In contrast, externally recruited CEOs present a different scenario, often involving higher compensation but with a less straightforward impact on firm performance. We also explore how firm size moderates this relationship, uncovering complex dynamics that challenge traditional assumptions in strategic management.
