CEO Turnover and Director Reputation

Type
working paper
Author(s)
;
Romer, Jonas
;
Abstract
This paper analyzes the reputational effects of forced CEO turnovers on outside directors. We find that outside directors interlocked to a forced CEO turnover experience a large and persistent increase in withheld votes at subsequent board re-elections relative to non-turnover-interlocked directors. Increases in withheld votes are confined to departures without a successor in place, performance-induced turnovers, and turnovers that occur during the most productive time within a CEO's tenure. Reputational losses are larger for board committee members responsible for hiring and monitoring the ousted CEO and for directors affiliated with the CEO. Involvement in a forced CEO turnover is not associated with a long-term loss in directorships, but lost directorships are replaced by directorships at smaller firms. Our results imply that forced CEO turnovers signal a governance failure at the board level and that investors rely on salient actions to update their beliefs about directors' hidden qualities.
Language
English
Keywords
CEO turnover
Director re-elections
Director reputation
CEO succession
Corporate governance
HSG Classification
contribution to scientific community
HSG Profile Area
SOF - System-wide Risk in the Financial System
Pages
58
URL
Subject(s)

finance

Division(s)

SBF - Swiss Institute...

Contact Email Address
markus.schmid@unisg.ch
Eprints ID
262868
File(s)
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