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CEO Turnover in LBOs: The Role of Boards

Francesca Cornelli

London Business School; Centre for Economic Policy Research (CEPR)

Oğuzhan Karakaş

Boston College - Department of Finance

October 2014

We examine the CEO turnover in LBOs backed by private equity funds. When a company is taken private, we find that the CEO turnover decreases and is less contingent on performance. We also find that a higher involvement of the LBO sponsors, who replace the outside directors on the board after transition to private, reduces the CEO turnover and its sensitivity to performance, but improves the operating performance. These findings suggest that more inside information and effective monitoring allow private equity funds to assess CEOs' performance over a longer horizon relative to their publicly-traded counterparts.

Number of Pages in PDF File: 40

Keywords: CEO Turnover, Private Equity, Leveraged Buyouts, Boards of Directors, Corporate Governance

JEL Classification: G34, G30, G24

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Date posted: May 25, 2013 ; Last revised: October 26, 2014

Suggested Citation

Cornelli, Francesca and Karakaş, Oğuzhan, CEO Turnover in LBOs: The Role of Boards (October 2014). Available at SSRN: http://ssrn.com/abstract=2269124 or http://dx.doi.org/10.2139/ssrn.2269124

Contact Information

Francesca Cornelli
London Business School ( email )
Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom
+44 20 7262 5050 x3225 (Phone)
+44 20 7724 3317 (Fax)
HOME PAGE: http://www.lbs.ac.uk/faculty/fcornelli/
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Oğuzhan Karakaş (Contact Author)
Boston College - Department of Finance ( email )
Carroll School of Management
Fulton Hall 334, 140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States
+1-617-552-1175 (Phone)
+1-617-552-0431 (Fax)
HOME PAGE: http://www2.bc.edu/~karakas/
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