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The Effect of CEO Tenure on the Relation between Firm Performance and Turnover

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  • Allgood, Sam
  • Farrell, Kathleen A

Abstract

We analyze the effect of CEO tenure on the relation between firm performance and forced turnover. We find that the performance-forced turnover relation is conditional on CEO tenure. Our results suggest a constant negative relation between firm performance and forced turnover throughout an inside CEO's tenure. Founders are entrenched early in their careers but held accountable for firm performance later in their careers. We find evidence that outside hires experience a probationary period, followed by a period of apparent entrenchment during their intermediate years that weakens later in their tenure.

Suggested Citation

  • Allgood, Sam & Farrell, Kathleen A, 2000. "The Effect of CEO Tenure on the Relation between Firm Performance and Turnover," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 23(3), pages 373-390, Fall.
  • Handle: RePEc:bla:jfnres:v:23:y:2000:i:3:p:373-90
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    Cited by:

    1. repec:eee:glofin:v:35:y:2018:i:c:p:12-42 is not listed on IDEAS
    2. Olie René & Heijltjes Mariëlle G. & Glunk Ursula, 2003. "Continuity And Renewal At The Top: Performance Effects Of The Level, Extent, Type And Frequency Of Top Management Team Changes," Research Memorandum 059, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    3. David Blackwell & Donna Dudney & Kathleen Farrell, 2007. "Changes in CEO compensation structure and the impact on firm performance following CEO turnover," Review of Quantitative Finance and Accounting, Springer, vol. 29(3), pages 315-338, October.
    4. Hadani, Michael & Dahan, Nicolas M. & Doh, Jonathan P., 2015. "The CEO as chief political officer: Managerial discretion and corporate political activity," Journal of Business Research, Elsevier, vol. 68(11), pages 2330-2337.
    5. Powers, Eric A., 2005. "Interpreting logit regressions with interaction terms: an application to the management turnover literature," Journal of Corporate Finance, Elsevier, vol. 11(3), pages 504-522, June.
    6. repec:spt:fininv:v:6:y:2017:i:4:f:6_4_4 is not listed on IDEAS
    7. repec:mic:tmpjrn:v:13:y:2017:i:01:p:37-52 is not listed on IDEAS
    8. G. Stacy Sirmans & H. Swint Friday & Russell M. Price, 2006. "Do Management Changes Matter? An Empirical Investigation of REIT Performance," Journal of Real Estate Research, American Real Estate Society, vol. 28(2), pages 131-148.
    9. Monika Hamori, 2004. "The organizational predictors of executive career advancement in career moves across employers," Working Papers Economia wp04-32, Instituto de Empresa, Area of Economic Environment.
    10. Yudan Zheng, 2010. "The effect of CEO tenure on CEO compensation: Evidence from inside CEOs vs outside CEOs," Managerial Finance, Emerald Group Publishing, vol. 36(10), pages 832-859, August.
    11. McNeil, Chris & Niehaus, Greg & Powers, Eric, 2004. "Management turnover in subsidiaries of conglomerates versus stand-alone firms," Journal of Financial Economics, Elsevier, vol. 72(1), pages 63-96, April.
    12. Monika Hamori, 2006. "Executive Loyalty and Employer Attributes," Working Papers Economia wp06-10, Instituto de Empresa, Area of Economic Environment.
    13. Ting, Hsiu-I, 2013. "CEO turnover and shareholder wealth: Evidence from CEO power in Taiwan," Journal of Business Research, Elsevier, vol. 66(12), pages 2466-2472.
    14. repec:spr:jecfin:v:42:y:2018:i:1:d:10.1007_s12197-017-9390-1 is not listed on IDEAS

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