Many firms are changing the composition of their top management team (TMT) to include a Supply Chain and Operations Management Executive (SCOME). SCOMEs as part of TMTs have responsibility for all or a broad spectrum of the Supply Chain and Operations Management functions. This paper empirically examines three issues related to the appointment of SCOMEs. First, we examine the stock market reaction to announcements of appointments of SCOMEs. Second, we examine the stock price and operating performance before and after the appointment of SCOMEs. Third, we identify and investigate factors that can affect the likelihood of whether an appointed SCOME is promoted from inside the firm or hired from outside.
Our empirical analysis is based on a sample of 496 SCOME appointments that are publicly announced during 2000-2009 period. We find that the stock market reaction is positive on the day of the announcement. The market reaction is more positive for appointments in newly created positions than existing positions. The market also reacts more positively when a SCOME is an outsider rather than an insider. We find evidence of both poor stock price performance and poor operating performance in the period preceding the appointment of SCOMEs. New SCOME appointments are not followed by an immediate improvement in stock price and operating performance. However, there is no further decline in performance suggesting that the decline observed in the pre-appointment period does not appear to continue after the new SCOME is appointed. We also find that the likelihood of a SCOME being an outsider is greater for firms that are smaller, operate in more concentrated industries, and have experienced poor prior performance.