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Do banks really monitor? Evidence from CEO succession decisions

Listed author(s):
  • Marshall, Andrew
  • McCann, Laura
  • McColgan, Patrick
Registered author(s):

    We demonstrate that banks play an important monitoring role in CEO succession that is not observed for other types of lenders, particularly public bondholders. There is a stronger relation between cash flow performance and forced CEO turnover for firms issuing bank debt during the year of CEO turnover than for firms not issuing bank debt, and bank debt issuance increases the likelihood of external CEO succession. The stock price reaction to CEO succession is higher when bank monitoring is prevalent. Our results are consistent with theories of relationship banking that propose a valuable monitoring role for well informed, incentivized bank lenders.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0378426614001782
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    Article provided by Elsevier in its journal Journal of Banking & Finance.

    Volume (Year): 46 (2014)
    Issue (Month): C ()
    Pages: 118-131

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    Handle: RePEc:eee:jbfina:v:46:y:2014:i:c:p:118-131
    DOI: 10.1016/j.jbankfin.2014.05.017
    Contact details of provider: Web page: http://www.elsevier.com/locate/jbf

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