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CEO Turnover and Director Reputation

Type
working paper
Author(s)
von Meyerinck, Felix  
Romer, Jonas
Schmid, Markus  
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
https://www.alexandria.unisg.ch/handle/20.500.14171/116799
Subject(s)

finance

Division(s)

s/bf - Swiss Institut...

Contact Email Address
markus.schmid@unisg.ch
Eprints ID
262868
File(s)
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CEO_turnover_and_director_reputation_20210228.pdf

Size

590.45 KB

Format

Adobe PDF

Checksum (MD5)

5e694ed29ea17b3e7f1f48d35191b42d

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