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CEO Turnover and Volatility under Long-Term Employment Contracts

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  • Cziraki, Peter
  • Groen-Xu, Moqi

Abstract

We study the role of the contractual time horizon of chief executive officers (CEOs) for CEO turnover and corporate policies. Using hand-collected data on 3,954 fixed-term CEO contracts, we show that remaining time under contract predicts CEO turnover. When contracts are close to expiration, turnover is more likely and is more sensitive to performance. We also show a positive within-CEO relation between remaining time under contract and firm risk. Our results are similar across short and long contracts and are driven neither by firm or CEO survival, nor technological cycles. They are consistent with incentives to take long-term projects with interim volatility.

Suggested Citation

  • Cziraki, Peter & Groen-Xu, Moqi, 2020. "CEO Turnover and Volatility under Long-Term Employment Contracts," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 55(6), pages 1757-1791, September.
    • Handle: RePEc:cup:jfinqa:v:55:y:2020:i:6:p:1757-1791_1
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    Cited by:

    1. Lingfei Kong & Gunratan Lonare & Ahmet Nart, 2022. "Industry tournament incentives and corporate innovation strategies," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 45(1), pages 124-161, March.
    2. Peter Cziraki & Dirk Jenter, 2021. "The Market for CEOs," CESifo Working Paper Series 9143, CESifo.
    3. Çolak, Gönül & Korkeamäki, Timo, 2021. "CEO mobility and corporate policy risk," Journal of Corporate Finance, Elsevier, vol. 69(C).
    4. Luc Renneboog & Yang Zhao, 2020. "Director networks, turnover, and appointments," European Financial Management, European Financial Management Association, vol. 26(1), pages 44-76, January.
    5. Ferhat Akbas & Chao Jiang & Paul D. Koch, 2020. "Insider Investment Horizon," Journal of Finance, American Finance Association, vol. 75(3), pages 1579-1627, June.

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