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Why CEOs Resign: Poor Performance or Better Opportunities?

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Listed:
  • Nikos Bozionelos

    (Audencia Recherche - Audencia Business School)

  • Sumona Mukhuty

    (HUBS - Hull University Business School - University of Hull [United Kingdom])

Abstract

The article focuses on factors that affect CEOs resignation. The common view is that CEOs resign because shareholders and the board force them to leave due to lower-than-expected performance. The present study challenges this view by suggesting that in fact CEOs often leave because of better opportunities elsewhere. They can find such opportunities by means of their networks, or connectedness, because CEO positions are rarely advertised. Therefore, connectedness provides an advantage in terms of finding a better position. Using data from a large database that contained information from nearly 7,500 CEOs over a 20-year period provided support for this idea. Connectedness, especially for "young" (i.e., below 60 years of age) CEOs weighted more in their resignations than poor firm performance. Nevertheless, connectedness was related to CEOs departure under any firm performance condition, suggesting that CEOs do not always leave because they are forced to but often because they have found a better deal in another firm.

Suggested Citation

  • Nikos Bozionelos & Sumona Mukhuty, 2015. "Why CEOs Resign: Poor Performance or Better Opportunities?," Post-Print hal-01145842, HAL.
    • Handle: RePEc:hal:journl:hal-01145842
    DOI: 10.5465/amp.2015.0039
    Note: View the original document on HAL open archive server: https://audencia.hal.science/hal-01145842
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    References listed on IDEAS

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    1. Liu, Yun, 2014. "Outside options and CEO turnover: The network effect," Journal of Corporate Finance, Elsevier, vol. 28(C), pages 201-217.
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