CEO turnover and relative performance evaluation

Dirk Jenter and Fadi Kanaan

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

Abstract: This paper shows that CEOs are fired after bad firm performance caused by factors beyond their control. Standard economic theory predicts that corporate boards filter out exogenous industry and market shocks from firm performance before deciding on CEO retention. Using a hand-collected sample of 3,365 CEO turnovers from 1993 to 2009, we document that CEOs are significantly more likely to be dismissed from their jobs after bad industry and, to a lesser extent, after bad market performance. A decline in industry performance from the 90th to the 10th percentile doubles the probability of a forced CEO turnover.

JEL-codes: F3 G3 (search for similar items in EconPapers)
Date: 2015-10-01
New Economics Papers: this item is included in nep-bec, nep-cfn and nep-hrm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (218)

Published in Journal of Finance, 1, October, 2015, 70(5), pp. 2155 - 2184. ISSN: 0022-1082

Downloads: (external link)
http://eprints.lse.ac.uk/64421/ Open access version. (application/pdf)

Related works:
Journal Article: CEO Turnover and Relative Performance Evaluation (2015)
Working Paper: CEO Turnover and Relative Performance Evaluation (2008)
Working Paper: CEO Turnover and Relative Performance Evaluation (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:64421

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