How Does Forced-CEO-Turnover Experience Affect Directors?

Jesse Ellis, Lixiong Guo and Shawn Mobbs

Journal of Financial and Quantitative Analysis, 2021, vol. 56, issue 4, 1163-1191

Abstract: We study changes in independent director behavior and labor-market outcomes after the experience of a forced Chief Executive Officer (CEO) turnover. We find that independent directors are more willing to fire CEOs of underperforming firms, hire outside CEOs after a firing, and encourage better board-meeting attendance by fellow directors. We also find that the shareholders of poorly performing firms react positively when experienced directors join the board. It does come with a small cost for directors, in terms of additional directorships, although the cost is not as great as that for directors who do not fire the CEO of a poorly performing firm.

Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:cup:jfinqa:v:56:y:2021:i:4:p:1163-1191_2

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