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The Market for Comeback CEOs

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Author Info
Fahlenbrach, Rudiger (Ohio State U)
Minton, Bernadette A.
Pan, Carrie H.
Abstract

We study the determinants and valuation consequences of rehiring a former CEO. Rehiring is more likely after poor performance of the current CEO, if the former CEO performed well during his prior tenure and maintains strong connections to the firm, and the more intangible are the firm’s assets. While the market reacts negatively to the rehiring announcement, the accounting and stock market performances of rehired CEO firms do not differ from those of a control sample over the two years following the turnover. Our evidence suggests that firms rehiring their former CEOs hire the best available candidate given the circumstances.

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Paper provided by Ohio State University, Charles A. Dice Center for Research in Financial Economics in its series Working Paper Series with number 2007-4.

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Date of creation: Feb 2007
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Handle: RePEc:ecl:ohidic:2007-4

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G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies

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  1. Renée B. Adams & Heitor Almeida & Daniel Ferreira, 2005. "Powerful CEOs and Their Impact on Corporate Performance," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 18(4), pages 1403-1432. [Downloadable!] (restricted)
  2. Coles, Jeffrey L. & Daniel, Naveen D. & Naveen, Lalitha, 2008. "Boards: Does one size fit all," Journal of Financial Economics, Elsevier, vol. 87(2), pages 329-356, February. [Downloadable!] (restricted)
  3. Brickley, James A. & Linck, James S. & Coles, Jeffrey L., 1999. "What happens to CEOs after they retire? New evidence on career concerns, horizon problems, and CEO incentives," Journal of Financial Economics, Elsevier, vol. 52(3), pages 341-377, June. [Downloadable!] (restricted)
  4. Barber, Brad M. & Lyon, John D., 1996. "Detecting abnormal operating performance: The empirical power and specification of test statistics," Journal of Financial Economics, Elsevier, vol. 41(3), pages 359-399, July. [Downloadable!] (restricted)
  5. Gibbons, Robert & Murphy, Kevin J, 1992. "Optimal Incentive Contracts in the Presence of Career Concerns: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 468-505, June. [Downloadable!] (restricted)
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  6. Fama, Eugene F. & French, Kenneth R., 1997. "Industry costs of equity," Journal of Financial Economics, Elsevier, vol. 43(2), pages 153-193, February. [Downloadable!] (restricted)
  7. Linck, James S. & Netter, Jeffry M. & Yang, Tina, 2008. "The determinants of board structure," Journal of Financial Economics, Elsevier, vol. 87(2), pages 308-328, February. [Downloadable!] (restricted)
  8. Warner, Jerold B. & Watts, Ross L. & Wruck, Karen H., 1988. "Stock prices and top management changes," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 461-492, January. [Downloadable!] (restricted)
  9. Holthausen, Robert W. & Larcker, David F., 1996. "The financial performance of reverse leveraged buyouts," Journal of Financial Economics, Elsevier, vol. 42(3), pages 293-332, November. [Downloadable!] (restricted)
  10. Larcker, David F., 2003. "Discussion of "are executive stock options associated with future earnings?"," Journal of Accounting and Economics, Elsevier, vol. 36(1-3), pages 91-103, December. [Downloadable!] (restricted)
  11. Bertrand, Marianne & Schoar, Antoinette, 2003. "Managing With Style: The Effect of Managers on Firm Policies," Working papers 4280-02, Massachusetts Institute of Technology (MIT), Sloan School of Management. [Downloadable!]
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  12. Robert Gibbons & Kevin J. Murphy, 1992. "Optimal Incentive Contracts in the Presence of Career Concerns: Theory and Evidence," NBER Working Papers 3792, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  13. Shivaram Rajgopal & Terry Shevlin & Valentina Zamora, 2006. "CEOs' Outside Employment Opportunities and the Lack of Relative Performance Evaluation in Compensation Contracts," Journal of Finance, American Finance Association, vol. 61(4), pages 1813-1844, 08. [Downloadable!] (restricted)
  14. Renée B. Adams & Daniel Ferreira, 2007. "A Theory of Friendly Boards," Journal of Finance, American Finance Association, vol. 62(1), pages 217-250, 02. [Downloadable!] (restricted)
  15. Parrino, Robert, 1997. "CEO turnover and outside succession A cross-sectional analysis," Journal of Financial Economics, Elsevier, vol. 46(2), pages 165-197, November. [Downloadable!] (restricted)
  16. Denis, David J & Denis, Diane K, 1995. " Performance Changes Following Top Management Dismissals," Journal of Finance, American Finance Association, vol. 50(4), pages 1029-57, September. [Downloadable!] (restricted)
  17. Xavier Gabaix & Augustin Landier, 2008. "Why Has CEO Pay Increased So Much?," The Quarterly Journal of Economics, MIT Press, vol. 123(1), pages 49-100, 02. [Downloadable!] (restricted)
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