CEO Turnovers Due to Poor Industry Performances: An Examination of the Boards' Retention Criteria

Lin Li (), Peter Lam, Wilson H.S. Tong and Justin Law
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Lin Li: Audencia Business School, Shenzhen University [Shenzhen]
Peter Lam: UTS - University of Technology Sydney
Wilson H.S. Tong: POLYU - The Hong Kong Polytechnic University [Hong Kong]

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Abstract: Numerous studies examine CEO turnover but rarely in the context of business cycles. We demonstrate that the role of the set of turnover decision parameters could change according to industry conditions. Specifically, idiosyncratic returns are more conducive to forced CEO turnover probabilities during recessions than during booms, whereas the opposite is true for industry returns. We provide evidence supporting that idiosyncratic returns are more correlated with managerial ability and stock prices are more informative during recessions. Our findings shed light on how CEOs are assessed by company boards when making turnover decisions.

Keywords: CEO turnovers; idiosyncratic returns; industry returns; industry conditions; price informativeness (search for similar items in EconPapers)
Date: 2024-01
Note: View the original document on HAL open archive server: https://audencia.hal.science/hal-04425594
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Published in Journal of Accounting and Public Policy, In press, 44, pp.107178. ⟨10.1016/j.jaccpubpol.2024.107178⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04425594

DOI: 10.1016/j.jaccpubpol.2024.107178

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