CEOs Under Fire: The Effects of Competition from Inside Directors on Forced CEO Turnover and CEO Compensation
H. Shawn Mobbs
University of Alabama
March 5, 2012
Journal of Financial and Quantitative Analysis (JFQA), Forthcoming
EFA 2009 Bergen Meetings Paper
AFA 2009 San Francisco Meetings Paper
CELS 2009 4th Annual Conference on Empirical Legal Studies Paper
This study examines board monitoring when a credible CEO replacement is on the board. Inside directors whose talents are in greater demand externally, as reflected by their holding outside directorships, are more likely to become CEOs and their presence is associated with greater forced CEO turnover sensitivity to accounting performance and CEO compensation sensitivity to stock performance. These results reveal that certain insiders strengthen board monitoring by serving as a readily available CEO replacement and contradict the presumption that all insiders are under CEO control. Furthermore, the results persist when accounting for the endogenous firm selection of talented inside directors.
Number of Pages in PDF File: 61
Keywords: CEO turnover, compensation, directors, board monitoring, inside directors, succession, labor market competition, reputation
JEL Classification: G30, G32, G34Accepted Paper Series
Date posted: March 19, 2008 ; Last revised: May 7, 2013
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