Outside options and CEO turnover: The network effect

Yun Liu

Journal of Corporate Finance, 2014, vol. 28, issue C, 201-217

Abstract: Most studies consider chief executive officer (CEO) turnover from the firm's perspective. In this paper, I suggest that the labor market conditions for CEOs affect turnover outcomes. I use CEOs' positions on corporate executive and director networks to assess their employment options. Controlling for performance, firm characteristics, and personal traits, I find that CEO connectedness significantly increases turnover probability, especially for poor performers. I also show that connectedness increases the likelihood of CEOs leaving for other full-time positions, or their retiring and taking part-time positions elsewhere, but does not have a significant effect on the likelihood that they will step down and remain with the firm in other capacities. The evidence supports the idea that a CEO's connectedness expands outside options and thus increases turnover probability.

Keywords: CEO turnover; CEO networks; Outside options (search for similar items in EconPapers)
JEL-codes: G3 J4 L14 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (39)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:28:y:2014:i:c:p:201-217

DOI: 10.1016/j.jcorpfin.2014.03.004

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