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CEO tenure, the risk of termination and firm value

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  • Brookman, Jeff
  • Thistle, Paul D.
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    Abstract

    We examine CEOs' risk of termination, its determinants and its effect on firm value. Using survival analysis, we find that the risk of termination increases for about thirteen years before decreasing slightly with CEO tenure; 82% of CEOs have tenure of less than thirteen years. We also find that tenure increases with performance and compensation and decreases with monitoring by the board. Changes in the risk of termination do not have a significant effect on firm value. Taken as a whole, our results are consistent with the view that corporate governance functions reasonably well for the vast majority of firms.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Corporate Finance.

    Volume (Year): 15 (2009)
    Issue (Month): 3 (June)
    Pages: 331-344

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    Handle: RePEc:eee:corfin:v:15:y:2009:i:3:p:331-344

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    Web page: http://www.elsevier.com/locate/jcorpfin

    Related research

    Keywords: CEO termination Corporate governance CEO tenure CEO turnover Survival analysis;

    References

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    Cited by:
    1. Antia, Murad & Pantzalis, Christos & Park, Jung Chul, 2010. "CEO decision horizon and firm performance: An empirical investigation," Journal of Corporate Finance, Elsevier, vol. 16(3), pages 288-301, June.

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