CEO turnover and volatility under long-term employment contracts

Peter Cziraki and Moqi Xu

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We study the role of the contractual time horizon of chief executive officers (CEOs) for CEO turnover and corporate policies. Using hand-collected data on 3,954 fixed-term CEO contracts, we show that remaining time under contract predicts CEO turnover. When contracts are close to expiration, turnover is more likely and is more sensitive to performance. We also show a positive within-CEO relation between remaining time under contract and firm risk. Our results are similar across short and long contracts and are driven neither by firm or CEO survival, nor technological cycles. They are consistent with incentives to take long-term projects with interim volatility.

Keywords: risk taking; volatility; career concerns; CEO contracts; CEO turnover (search for similar items in EconPapers)
JEL-codes: G34 J41 J63 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2020-09-01
New Economics Papers: this item is included in nep-bec, nep-hrm and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published in Journal of Financial and Quantitative Analysis, 1, September, 2020, 55(6), pp. 1757 - 1791. ISSN: 0022-1090

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:100757

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