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CEO turnover and volatility under long-term employment contracts

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  • Cziraki, Peter
  • Xu, Moqi

Abstract

We study the role of the contractual time horizon of CEOs for CEO turnover and corporate policies. Using hand-collected data on 3,954 fixed-term CEO contracts, we show that remaining time under contract predicts CEO turnover. When contracts are close to expiration, turnover is more likely and is more sensitive to performance. We also show a positive within-CEO relation between remaining time under contract and firm risk. Our results are similar across short and long contracts and are driven neither by firm or CEO survival, nor technological cycles. They are consistent with incentives to take long-term projects with interim volatility.

Suggested Citation

  • Cziraki, Peter & Xu, Moqi, 2019. "CEO turnover and volatility under long-term employment contracts," LSE Research Online Documents on Economics 100757, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:100757
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    File URL: http://eprints.lse.ac.uk/100757/
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    References listed on IDEAS

    as
    1. Eisfeldt, Andrea L. & Kuhnen, Camelia M., 2013. "CEO turnover in a competitive assignment framework," Journal of Financial Economics, Elsevier, vol. 109(2), pages 351-372.
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    14. repec:bla:joares:v:31:y:1993:i:2:p:246-271 is not listed on IDEAS
    15. Brickley, James A., 2003. "Empirical research on CEO turnover and firm-performance: a discussion," Journal of Accounting and Economics, Elsevier, vol. 36(1-3), pages 227-233, December.
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    More about this item

    Keywords

    risk taking; volatility; career concerns; CEO contracts; CEO turnover;

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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