The Cyclicality of CEO Turnover

Carl Liebersohn and Heidi Packard
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Carl Liebersohn: Ohio State U
Heidi Packard: U of Michigan

Working Paper Series from Ohio State University, Charles A. Dice Center for Research in Financial Economics

Abstract: CEO turnover is highly pro-cyclical. This paper aims to explain why. We begin by showing that the cyclicality is driven almost entirely by executives of retirement age. We further provide evidence that executives time their retirement to maximize the value of their pensions. Since CEO pay is pro-cyclical and pensions are based on pay in the final years of tenure, executives have the incentive to retire when the economy is doing well. Cyclicality is particular strong in firms with strong corporate governance, which suggests that retirement cyclicality is a tool firms use to constrain CEO behavior.

JEL-codes: J26 M12 M51 (search for similar items in EconPapers)
Date: 2019-12
New Economics Papers: this item is included in nep-age, nep-bec and nep-cfn
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:ohidic:2019-32

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