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CEO turnover and financial policy transfer

Author

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  • Kim, Daniel Sungyeon
  • Ahn, Kwangwon
  • Jang, Hanwool
  • Lee, Jaeyoon

Abstract

We explore how Chief Executive Officer (CEO) turnovers influence firms’ capital structures. Our findings indicate that adjustments in capital structure are markedly more significant when the incoming CEO is sourced from outside the firm, compared to internal promotions. Moreover, firms undergoing CEO turnovers tend to realign their actual leverage to target levels more swiftly than those without such changes, with this process being particularly accelerated when the CEO is externally appointed. A notable insight from our analysis is that external CEOs frequently adopt and apply leverage strategies from their previous positions, transferring financial strategies that reflect their past experiences. These patterns remain robust when we specifically examine forced turnovers, suggesting that the external versus internal nature of succession, rather than the reason for turnover, drives the transfer of financial policies.

Suggested Citation

  • Kim, Daniel Sungyeon & Ahn, Kwangwon & Jang, Hanwool & Lee, Jaeyoon, 2025. "CEO turnover and financial policy transfer," The North American Journal of Economics and Finance, Elsevier, vol. 77(C).
    • Handle: RePEc:eee:ecofin:v:77:y:2025:i:c:s1062940825000221
    DOI: 10.1016/j.najef.2025.102382
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    Keywords

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    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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