IDEAS home Printed from
   My bibliography  Save this article

Governance and CEO Turnover: Do Something or Do the Right Thing?


  • Raymond J. Fisman

    () (Columbia Business School, New York, New York 10027)

  • Rakesh Khurana

    () (Harvard Business School, Boston, Massachusetts 02163)

  • Matthew Rhodes-Kropf

    () (Harvard Business School, Boston, Massachusetts 02163)

  • Soojin Yim

    () (Goizueta Business School, Emory University, Atlanta, Georgia 30322)


We study how corporate governance affects firm value through the decision of whether to fire or retain the chief executive officer (CEO). We present a model in which weak governance---which prevents shareholders from controlling the board---protects inferior CEOs from dismissal, while at the same time insulates the board from pressures by biased or uninformed shareholders. Whether stronger governance improves retain/replace decisions depends on which of these effects dominates. We use our theoretical framework to assess the effect of governance on the quality of firing and hiring decisions using data on the CEO dismissals of large U.S. corporations during 1994--2007. Our findings are most consistent with a beneficent effect of weak governance on CEO dismissal decisions, suggesting that insulation from shareholder pressure may allow for better long-term decision making. This paper was accepted by Brad Barber, finance.

Suggested Citation

  • Raymond J. Fisman & Rakesh Khurana & Matthew Rhodes-Kropf & Soojin Yim, 2014. "Governance and CEO Turnover: Do Something or Do the Right Thing?," Management Science, INFORMS, vol. 60(2), pages 319-337, February.
  • Handle: RePEc:inm:ormnsc:v:60:y:2014:i:2:p:319-337

    Download full text from publisher

    File URL:
    Download Restriction: no


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Dirk Jenter & Fadi Kanaan, 2015. "CEO Turnover and Relative Performance Evaluation," Journal of Finance, American Finance Association, vol. 70(5), pages 2155-2184, October.
    2. repec:eee:jaecon:v:64:y:2017:i:1:p:37-55 is not listed on IDEAS
    3. Correa, Ricardo & Lel, Ugur, 2016. "Say on pay laws, executive compensation, pay slice, and firm valuation around the world," Journal of Financial Economics, Elsevier, vol. 122(3), pages 500-520.
    4. Duflo, Esther & Dupas, Pascaline & Kremer, Michael, 2015. "School governance, teacher incentives, and pupil–teacher ratios: Experimental evidence from Kenyan primary schools," Journal of Public Economics, Elsevier, vol. 123(C), pages 92-110.
    5. Bang Dang Nguyen, 2015. "Is More News Good News? Media Coverage of CEOs, Firm Value, and Rent Extraction," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 5(04), pages 1-38, December.


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:60:y:2014:i:2:p:319-337. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.