The Effects of Board Independence on Forced CEO Turnovers: Evidence from a US-Japan Comparison

Atsuko Izumi and Hyeog Ug Kwon

International Economic Journal, 2025, vol. 39, issue 2, 315-340

Abstract: We hypothesize that the desire of insider board members to keep their employment impedes corporate performance recovery and asset restructuring after CEO replacement. Using forced CEO turnover events from 2000 to 2007 in the United States and Japan, we show that ROA and stock performance improve after forced CEO turnovers only in the United States, where boards are highly independent, but not in Japan, where boards are insider-dominated. We also find that asset restructuring and labor force reduction are up to seventeen times larger in the United States than in Japan. The subsample analysis for the United State confirms that post-turnover corporate outcomes are driven by board independence.

Date: 2025
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DOI: 10.1080/10168737.2025.2467897

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