Are Forced Turnovers Good or Bad News?
AbstractTo gain insights� about� the� quality� of board’s� firing� decisions,� we investigate� abnormal stock returns and operating performance around CEO-turnover announcements in a new hand- collected sample of 208 “clean” turnover events between January 1998 and June 2009. Unlike the� majority� of previous� studies,� we show that� forced turnovers� do not� per se represent� a positive signal to hareholders.� On the contrary, investors seem to critically assess the board’s firing decision by considering the quality of the departing manager.� When an outperforming CEO is dismissed or forced to leave - an event that occurs in as many as 35% of all dismissals in our sample - shareholders disesteem the board’s decision.� This finding is confirmed in multivariate cross-sectional regressions, holds for different time subperiods, and is robust to various event-test specifications and proxies of CEO quality.
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Bibliographic InfoPaper provided by Faculty of Business and Economics - University of Basel in its series Working papers with number 2011/10.
Date of creation: 2011
Date of revision:
CEO turnover; Corporate governance; Firm performance;
Find related papers by JEL classification:
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
- G30 - Financial Economics - - Corporate Finance and Governance - - - General
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-01-10 (All new papers)
- NEP-BEC-2012-01-10 (Business Economics)
- NEP-CFN-2012-01-10 (Corporate Finance)
- NEP-HRM-2012-01-10 (Human Capital & Human Resource Management)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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"CEO Turnover and Relative Performance Evaluation,"
NBER Working Papers
12068, National Bureau of Economic Research, Inc.
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