The Market for Comeback CEOs
Ecole Polytechnique Fédérale de Lausanne; Swiss Finance Institute
Bernadette A. Minton
Ohio State University (OSU) - Department of Finance
Carrie H. Pan
Santa Clara University - Department of Finance
AFA 2008 New Orleans Meetings Paper
We study the determinants and valuation consequences of rehiring a former CEO. Rehiring is more likely after poor performance of the current CEO, if the former CEO performed well during his prior tenure and maintains strong connections to the firm, and the more intangible are the firm's assets. While the market reacts negatively to the rehiring announcement, the accounting and stock market performances of rehired CEO firms do not differ from those of a control sample over the two years following the turnover. Our evidence suggests that firms rehiring their former CEOs hire the best available candidate given the circumstances.
Number of Pages in PDF File: 45
Keywords: CEO turnover, boomerang CEO, managerial effects, entrenchment
JEL Classification: G14, G34
Date posted: March 9, 2007
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