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Economic Policy Uncertainty And Board Monitoring: Evidence From Ceo Turnovers

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  • Melissa B. Frye
  • Duong T. Pham

Abstract

We examine whether economic policy uncertainty (EPU) affects a board's chief executive officer (CEO) replacement decision. We find that high EPU reduces the likelihood of forced CEO turnover. Our results support the idea that performance assessment may be more difficult when uncertainty is high. We provide evidence that succession planning may be important to firms in reducing the effects of EPU, as firms with an identifiable heir apparent are not influenced by high EPU. Likewise, voluntary CEO turnovers are not affected by EPU. Overall, our results provide evidence that boards make personnel decisions in response to external macroeconomic pressures.

Suggested Citation

  • Melissa B. Frye & Duong T. Pham, 2020. "Economic Policy Uncertainty And Board Monitoring: Evidence From Ceo Turnovers," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 43(3), pages 675-703, August.
    • Handle: RePEc:bla:jfnres:v:43:y:2020:i:3:p:675-703
    DOI: 10.1111/jfir.12222
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    Cited by:

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    2. Sarker, Md Showaib Rahman & Mazumder, Sharif & Amin, Md Ruhul, 2023. "Oil price uncertainty, workplace misconduct, and cash holding," International Review of Financial Analysis, Elsevier, vol. 89(C).
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    4. Ozili, Peterson Kitakogelu, 2021. "Economic policy uncertainty in banking: a literature review," MPRA Paper 108017, University Library of Munich, Germany.
    5. Sadok El Ghoul & Omrane Guedhami & Robert Nash & He (Helen) Wang, 2022. "Economic policy uncertainty and insider trading," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 45(4), pages 817-854, December.

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