IDEAS home Printed from https://ideas.repec.org/a/bla/finrev/v41y2006i3p307-337.html
   My bibliography  Save this article

The Importance of Board Quality in the Event of a CEO Death

Author

Listed:
  • Kenneth A. Borokhovich
  • Kelly R. Brunarski
  • Maura S. Donahue
  • Yvette S. Harman

Abstract

We examine board quality and executive replacement decisions around deaths of senior executives. Stock price reactions to executive deaths are positively related to board independence. Controlling for such factors as the deceased's stockholdings, outside blockholdings, board size, and whether the deceased was a founder, board independence is the most significant factor explaining abnormal returns. Board independence is particularly important when there is no apparent successor and firm performance is poor. The results are consistent with independent boards being reluctant to discipline poorly performing incumbent managers, but nevertheless using the opportunity of an executive death to improve the quality of management.

Suggested Citation

  • Kenneth A. Borokhovich & Kelly R. Brunarski & Maura S. Donahue & Yvette S. Harman, 2006. "The Importance of Board Quality in the Event of a CEO Death," The Financial Review, Eastern Finance Association, vol. 41(3), pages 307-337, August.
    • Handle: RePEc:bla:finrev:v:41:y:2006:i:3:p:307-337
    DOI: 10.1111/j.1540-6288.1969.tb01741.x-i1
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1540-6288.1969.tb01741.x-i1
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1540-6288.1969.tb01741.x-i1?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gjerløv-Juel, Pernille, 2019. "Executive turnover – Firms’ subsequent performances and the moderating role of organizational characteristics," European Management Journal, Elsevier, vol. 37(6), pages 794-805.
    2. Colak, Gonul & Liljeblom, Eva, 2022. "Easy cleanups or forbearing improvements: The effect of CEO tenure on successor’s performance," Journal of Financial Stability, Elsevier, vol. 63(C).
    3. Kilian Huber & Volker Lindenthal & Fabian Waldinger, 2021. "Discrimination, Managers, and Firm Performance: Evidence from “Aryanizations” in Nazi Germany," Journal of Political Economy, University of Chicago Press, vol. 129(9), pages 2455-2503.
    4. Nguyen, Bang Dang & Nielsen, Kasper Meisner, 2010. "The value of independent directors: Evidence from sudden deaths," Journal of Financial Economics, Elsevier, vol. 98(3), pages 550-567, December.
    5. Jill A. Brown & Anne Anderson & Jesus M. Salas & Andrew J. Ward, 2017. "Do Investors Care About Director Tenure? Insights from Executive Cognition and Social Capital Theories," Organization Science, INFORMS, vol. 28(3), pages 471-494, June.
    6. Rokiah Ishak Author_Email:, 2011. "Corporate Performance, Ceo Power And Ceo Turnover: Evidence From Malaysian Public Listed Companies," 2nd International Conference on Business and Economic Research (2nd ICBER 2011) Proceeding 2011-480, Conference Master Resources.
    7. Trabert, Sebastian, 2023. "Do younger CEOs really increase firm risk? Evidence from sudden CEO deaths," Journal of Corporate Finance, Elsevier, vol. 79(C).
    8. Pagano, Michael S., 2022. "How do Equity Investors Assess the Efficiency of Global Financial Institutions?," Finance Research Letters, Elsevier, vol. 49(C).
    9. Zahid Iqbal & Kun Wang & Sewon O, 2011. "Board independence and market reactions around news of stock option backdating," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 35(1), pages 104-115, January.
    10. Perryman, Alexa A. & Butler, Frank C. & Martin, John A. & Ferris, Gerald R., 2010. "When the CEO is ill: Keeping quiet or going public?," Business Horizons, Elsevier, vol. 53(1), pages 21-29, January.
    11. Ansari, Iram Fatima & Goergen, Marc & Mira, Svetlana, 2014. "The determinants of the CEO successor choice in family firms," Journal of Corporate Finance, Elsevier, vol. 28(C), pages 6-25.
    12. Betzer, André & Ibel, Maximilian & Lee, Hye Seung & Limbach, Peter & Salas, Jesus M., 2016. "Are generalists beneficial to corporate shareholders? Evidence from sudden deaths," CFR Working Papers 16-12, University of Cologne, Centre for Financial Research (CFR).
    13. Bang Dang Nguyen & Kasper Meisner Nielsen, 2014. "What Death Can Tell: Are Executives Paid for Their Contributions to Firm Value?," Management Science, INFORMS, vol. 60(12), pages 2994-3010, December.
    14. Waldinger, Fabian & Huber, Kilian & Lindenthal, Volker, 2018. "Discrimination, Managers, and Firm Performance: Evidence from “Aryanizations†in Nazi Germany," CEPR Discussion Papers 13089, C.E.P.R. Discussion Papers.
    15. André Betzer & Maximilian Ibel & Hye Seung (Grace) Lee & Peter Limbach & Jesus M. Salas, 2017. "Are Generalists Beneficial to Corporate Shareholders? Evidence from Sudden Deaths," Schumpeter Discussion Papers SDP16009, Universitätsbibliothek Wuppertal, University Library.
    16. 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.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:finrev:v:41:y:2006:i:3:p:307-337. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/efaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.