Are Generalists Beneficial to Corporate Shareholders? Evidence from Exogenous Executive Turnovers

André Betzer, Lee, Hye Seung (Grace), Peter Limbach and Jesus M. Salas

Journal of Financial and Quantitative Analysis, 2020, vol. 55, issue 2, 581-619

Abstract: This study finds a positive, economically meaningful impact of generalist chief executive officers (CEOs) on shareholder value using 164 sudden deaths and 345 non-sudden exogenous turnovers. The higher a departing CEO’s general ability index (GAI), independently and relative to her successor, the lower is the abnormal stock return to turnover announcements. Returns reflect post-turnover changes in operating performance. Further, CEOs’ and successors’ GAIs are significantly positively related, but only for non-sudden turnovers. Consistently, for sudden deaths, we find positive stock returns to appointments of generalist successors. The results provide a market-based explanation for the generalist pay premium.

Date: 2020
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