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Equity Issuance, CEO Turnover and Corporate Governance

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  • David Hillier
  • Scott C. Linn
  • Patrick McColgan

Abstract

"There is substantial evidence on the effect of external market discipline on chief executive turnover decisions in poorly performing companies. In this study we present evidence on the role of institutional monitoring in these decisions through the equity issuance process. We find that firms which undertake equity offerings are associated with an increased rate of forced CEO turnover that is focused on the managers of poorly performing companies. At the same time, equity offerings increase the likelihood of a new CEO being appointed from outside the current management team. We also provide evidence that independent boards are more likely to forcibly remove CEOs from their position, although this is not conditional on poor performance." Copyright Blackwell Publishers Ltd, 2005.

Suggested Citation

  • David Hillier & Scott C. Linn & Patrick McColgan, 2005. "Equity Issuance, CEO Turnover and Corporate Governance," European Financial Management, European Financial Management Association, vol. 11(4), pages 515-538.
  • Handle: RePEc:bla:eufman:v:11:y:2005:i:4:p:515-538
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    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1354-7798.2005.00295.x
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    Cited by:

    1. Seth Armitage, 2010. "Block Buying and Choice of Issue Method in UK Seasoned Equity Offers," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 37(3-4), pages 422-448.
    2. Marshall, Andrew & McCann, Laura & McColgan, Patrick, 2014. "Do banks really monitor? Evidence from CEO succession decisions," Journal of Banking & Finance, Elsevier, vol. 46(C), pages 118-131.
    3. David Hillier & Patrick McColgan, 2009. "Firm Performance and Managerial Succession in Family Managed Firms," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 36(3-4), pages 461-484.

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