Performance-induced CEO turnover

Dirk Jenter and Katharina Lewellen

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

Abstract: This paper revisits the relationship between firm performance and CEO turnover. We drop the distinction between forced and voluntary turnovers and introduce the concept of performance-induced turnover, defined as turnover that would not have occurred had performance been "good". We document a close link between performance and CEO turnover and estimate that between 38% and 55% of all turnovers are performance induced, with an even higher percentage early in tenure. This is significantly more than the number of forced turnovers identified in prior studies. We contrast the empirical properties of performance-induced turnovers with the predictions of Bayesian learning models of CEO turnover. Learning by boards about CEO ability appears to be slow, and boards act as if CEO ability (or match quality) was subject to frequent and sizeable shocks.

JEL-codes: G30 G34 M12 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2017-08-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://eprints.lse.ac.uk/118959/ Open access version. (application/pdf)

Related works:
Journal Article: Performance-Induced CEO Turnover (2021)
Working Paper: Performance-induced CEO turnover (2021)
Working Paper: Performance-induced CEO turnover (2017)
Working Paper: Performance-Induced CEO Turnover (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:118959

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