Performance-induced CEO turnover

Jenter, Dirk ORCID: 0000-0003-4168-9329 and Lewellen, Katharina (2021) Performance-induced CEO turnover. Review of Financial Studies, 34 (2). 569 - 617. ISSN 0893-9454

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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.

Item Type:	Article
Official URL:	https://academic.oup.com/rfs
Additional Information:	© 2020 The Authors
Divisions:	Finance
Subjects:	H Social Sciences > HD Industries. Land use. Labor H Social Sciences > HG Finance
JEL classification:	G - Financial Economics > G3 - Corporate Finance and Governance > G30 - General G - Financial Economics > G3 - Corporate Finance and Governance > G34 - Mergers; Acquisitions; Restructuring; Corporate Governance
Date Deposited:	16 Apr 2020 12:03
Last Modified:	16 Apr 2024 23:13
URI:	http://eprints.lse.ac.uk/id/eprint/104066

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