The evolution of boards and CEOs following performance declines

John C. Easterwood, Özgür Ş. İnce and Charu G. Raheja

Journal of Corporate Finance, 2012, vol. 18, issue 4, 727-744

Abstract: This paper examines the evolution of corporate boards following a large performance decline. Over 40% of the original directors depart the board during the three years following underperformance. Measures of initial CEO influence over the board such as CEO ownership are associated with smaller increases in board independence and less board turnover. The underperforming firms undergo a strong recovery subsequently, with the largest performance improvement occurring among firms that experience no turnover on their boards and among firms that do not change their board independence. We conclude that the large board turnover experienced by underperforming firms presents significant challenges for subsequent recovery.

Keywords: Corporate governance; CEO influence; Performance; Board structure; Director turnover; Financial distress (search for similar items in EconPapers)
JEL-codes: G3 G30 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:18:y:2012:i:4:p:727-744

DOI: 10.1016/j.jcorpfin.2012.05.006

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