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The Cadbury Committee, Corporate Performance, and Top Management Turnover

Author

Listed:
  • Jay Dahya

    (Krannert Graduate School of Management, Purdue University,)

  • John J. McConnell

    (Krannert Graduate School of Management, Purdue University,)

  • Nickolaos G. Travlos

    (Athens Laboratory of Business Administration and Cardiff Business School, Cardiff University)

Abstract

In 1992, the Cadbury Committee issued the "Code of Best Practice" which recommends that boards of U.K. corporations include at least three outside directors and that the positions of chairman and CEO be held by different individuals. The underlying presumption was that these recommendations would lead to improved board oversight. We empirically analyze the relationship between CEO turnover and corporate performance. CEO turnover increased following issuance of the "Code"; the negative relationship between CEO turnover and performance became stronger following the "Code"'s issuance; and the increase in sensitivity of turnover to performance was concentrated among firms that adopted the "Code". Copyright The American Finance Association 2002.

Suggested Citation

  • Jay Dahya & John J. McConnell & Nickolaos G. Travlos, 2002. "The Cadbury Committee, Corporate Performance, and Top Management Turnover," Journal of Finance, American Finance Association, vol. 57(1), pages 461-483, February.
  • Handle: RePEc:bla:jfinan:v:57:y:2002:i:1:p:461-483
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