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Corporate governance and chief executive officer dismissal following poor performance: Australian evidence

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  • James Lau
  • Philip Sinnadurai
  • Sue Wright

Abstract

This paper investigates the association between corporate performance and the probability of chief executive officer (CEO) dismissal for large corporations in Australia. Consistent with prior US and UK studies, corporate performance is negatively related to the probability of CEO dismissal, using both accounting and market-based performance measures. This paper also investigates whether key corporate governance characteristics affect the likelihood of CEO dismissal, by examining their effect on the strength of the negative association between corporate performance and CEO dismissal. The only significant variable is size of the board. Although its effect is opposite to that hypothesized, this paper provides a plausible explanation. Overall, the results are consistent with shareholder wealth considerations dominating board behaviour in Australia. Copyright (c) The Authors. Journal compilation (c) 2009 AFAANZ.

Suggested Citation

  • James Lau & Philip Sinnadurai & Sue Wright, 2009. "Corporate governance and chief executive officer dismissal following poor performance: Australian evidence," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 49(1), pages 161-182.
  • Handle: RePEc:bla:acctfi:v:49:y:2009:i:1:p:161-182
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    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-629X.2008.00278.x
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    Cited by:

    1. Reza Zare & Hoda Kiafar & Fatemeh Rasouli & Leila Sadeghi & Sadegh Behbahani, 2013. "Examining Financial Leverage, Profitability and Firm Life Influencing Nonfinancial Information Disclosure Quality," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 9(6), pages 163-175, December.
    2. Humphery-Jenner, Mark L. & Powell, Ronan G., 2011. "Firm size, takeover profitability, and the effectiveness of the market for corporate control: Does the absence of anti-takeover provisions make a difference?," Journal of Corporate Finance, Elsevier, vol. 17(3), pages 418-437, June.
    3. repec:kap:jmgtgv:v:22:y:2018:i:1:d:10.1007_s10997-017-9383-7 is not listed on IDEAS

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