Abstract

http://ssrn.com/abstract=885531
 
 

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CEO Turnover and Relative Performance Evaluation


Dirk Jenter


Stanford Graduate School of Business; National Bureau of Economic Research (NBER)

Fadi Kanaan


Massachusetts Institute of Technology (MIT) - Sloan School of Management

April 15, 2014

Stanford University Graduate School of Business Research Paper No. 1992
MIT Sloan Research Paper No. 4594-06
Rock Center for Corporate Governance Working Paper No. 24

Abstract:     
This paper shows that CEOs are fired after bad firm performance caused by factors beyond their control. Standard economic theory predicts that corporate boards filter out exogenous industry and market shocks from firm performance before deciding on CEO retention. Using a hand-collected sample of 3,365 CEO turnovers from 1993 to 2009, we document that CEOs are significantly more likely to be dismissed from their jobs after bad industry and, to a lesser extent, after bad market performance. A decline in industry performance from the 90th to the 10th percentile doubles the probability of a forced CEO turnover.

Number of Pages in PDF File: 34

Keywords: CEO Turnover, Performance Evaluation, Corporate Boards

JEL Classification: G30, G34, D20, D23, M51

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Date posted: February 17, 2006 ; Last revised: June 7, 2014

Suggested Citation

Jenter, Dirk and Kanaan, Fadi, CEO Turnover and Relative Performance Evaluation (April 15, 2014). Stanford University Graduate School of Business Research Paper No. 1992; MIT Sloan Research Paper No. 4594-06; Rock Center for Corporate Governance Working Paper No. 24. Available at SSRN: http://ssrn.com/abstract=885531 or http://dx.doi.org/10.2139/ssrn.885531

Contact Information

Dirk Jenter (Contact Author)
Stanford Graduate School of Business ( email )
518 Memorial Way
Stanford, CA 94305-5015
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Fadi Kanaan
Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )
50 Memorial Drive
Cambridge, MA 02142
United States
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