Outside Directors and CEO Selection

Kenneth A. Borokhovich, Robert Parrino and Teresa Trapani

Journal of Financial and Quantitative Analysis, 1996, vol. 31, issue 3, 337-355

Abstract: This paper documents a strong positive relation between the percentage of outside directors and the frequency of outside CEO succession. The likelihood that an executive from outside the firm is appointed CEO increases monotonically with the percentage of outside directors. This monotonic relation is observed for both voluntary and forced departures. Evidence from stock returns around succession announcements indicates that, on average, shareholders benefit from outside appointments, but are harmed when an insider replaces a fired CEO.

Date: 1996
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Persistent link: https://EconPapers.repec.org/RePEc:cup:jfinqa:v:31:y:1996:i:03:p:337-355_00

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