Work

Performance-Induced CEO Turnover

Year: 2020

Type: article

Abstract: This paper revisits the relationship between firm performance and CEO turnover. Instead of classifying turnovers into forced and voluntary, we introduce performance-induced turnover, defined as turnover that would not have occurred had performance been “good.” We document a close turnover-performance link and estimate that 38%–55% of turnovers are performance induced. This is significantly more than the number of forced turnovers, though the two types of turnovers are highly correlated. Compared to the predictions of Bayesian learning models, learning about CEO ability appears to be slow, and boards act as if CEO ability (or match quality) was subject to frequent shocks.

Source: Review of Financial Studies

DOI: 10.1093/rfs/hhaa069

Authors: Dirk Jenter, Katharina Lewellen

Institutions: Centre for Economic Policy Research, London School of Economics and Political Science, Dartmouth College

Language: English

Topic: Corporate Finance and Governance

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: bronze

OpenAlex ID: W3121633614