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CEO Turnover and Director Reputation

Author

Listed:
  • Felix von Meyerinck

    (University of Zurich)

  • Jonas Romer

    (University of St. Gallen)

  • Markus Schmid

    (University of St. Gallen; Swiss Finance Institute; ECGI)

Abstract

This paper analyzes the reputational effects of forced CEO turnovers on outside directors. Directors interlocked to a forced CEO turnover experience large and persistent increases in withheld votes at subsequent re-elections relative to non-turnover-interlocked directors. Reputational losses are larger for turnovers with a higher potential for disrupting a firm's management, for directors favorably inclined to the CEO, and for directors with a committee-based responsibility for monitoring the CEO. Our results imply that the average forced CEO turnover signals a governance failure at the board level, and that shareholders rely on salient actions to update their beliefs about directors' hidden qualities.

Suggested Citation

  • Felix von Meyerinck & Jonas Romer & Markus Schmid, 2023. "CEO Turnover and Director Reputation," Swiss Finance Institute Research Paper Series 23-87, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2387
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    More about this item

    Keywords

    CEO turnover; director elections; director reputation; CEO succession; shareholder voting;
    All these keywords.

    JEL classification:

    • 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

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