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Aggressive Boards and CEO Turnover

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  • CYRUS AGHAMOLLA
  • TADASHI HASHIMOTO

Abstract

This study investigates a communication game between a CEO and a board of directors where the CEO's career concerns can potentially impede value‐increasing informative communication. By adopting a policy of aggressive boards (excessive replacement), shareholders can facilitate communication between the CEO and the board. The results are in contrast to the multitude of models which generally find that management‐friendly boards improve communication, and help to explain empirical results concerning CEO turnover. The results also provide the following novel predictions concerning variation in CEO turnover: (1) there is greater CEO turnover in firms or industries where CEO performance is relatively more difficult to assess; (2) the board is more aggressive in their replacement of the CEO in industries or firms where the board's advisory role is more salient; and (3) there is comparatively less CEO turnover in firms or industries where the variance of CEO talent is high.

Suggested Citation

  • Cyrus Aghamolla & Tadashi Hashimoto, 2021. "Aggressive Boards and CEO Turnover," Journal of Accounting Research, Wiley Blackwell, vol. 59(2), pages 437-486, May.
    • Handle: RePEc:bla:joares:v:59:y:2021:i:2:p:437-486
    DOI: 10.1111/1475-679X.12350
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    1. Carla Morrone & Alberto Tron & Federico Colantoni & Salvatore Ferri, 2023. "The Different Impact of Top Executives’ Turnover on Healthy and Restructured Companies," International Journal of Business and Management, Canadian Center of Science and Education, vol. 17(1), pages 1-17, February.
    2. Li, Ziyang & Chen, Yanjun & Li, Yanlin, 2023. "Top management abnormal turnover and stock price crash risk: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 89(C).
    3. Cho-Min Lin & Ming-Chung Chang & Yi-Hui Chao, 2022. "The Forced Turnover Effect on an Overconfident CEO: Evidence From Taiwan-Listed Firms," SAGE Open, , vol. 12(1), pages 21582440221, March.

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