Do banks really monitor? Evidence from CEO succession decisions

Andrew Marshall, Laura McCann and Patrick McColgan

Journal of Banking & Finance, 2014, vol. 46, issue C, 118-131

Abstract: We demonstrate that banks play an important monitoring role in CEO succession that is not observed for other types of lenders, particularly public bondholders. There is a stronger relation between cash flow performance and forced CEO turnover for firms issuing bank debt during the year of CEO turnover than for firms not issuing bank debt, and bank debt issuance increases the likelihood of external CEO succession. The stock price reaction to CEO succession is higher when bank monitoring is prevalent. Our results are consistent with theories of relationship banking that propose a valuable monitoring role for well informed, incentivized bank lenders.

Keywords: Bank debt; CEO succession; Lender monitoring; External succession (search for similar items in EconPapers)
JEL-codes: G21 G32 G34 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:46:y:2014:i:c:p:118-131

DOI: 10.1016/j.jbankfin.2014.05.017

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