Mandatory Retirement Policies for CEOs

Jagannathan, Murali; Loon, Yee Cheng

doi:10.2139/ssrn.1536588

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Mandatory Retirement Policies for CEOs

55 Pages Posted: 14 Jan 2010 Last revised: 3 Jan 2012

See all articles by Murali Jagannathan

Murali Jagannathan

SUNY at Binghamton - School of Management

Yee Cheng Loon

Securities and Exchange Commission (SEC)

Date Written: December 30, 2011

Abstract

In this paper, we examine the motivation behind mandatory retirement policies that force CEOs to retire. Consistent with these policies being effective ways to ease out CEOs, we find that firms without mandatory retirement policies are valued lower and have poorer operating performance than other firms. We also find that mandatory retirement policies help “smooth” CEO successions. We do not observe a relation between CEO age and firm performance, suggesting that firms can increase mandatory retirement age without an adverse impact on firm value.

Keywords: Mandatory Retirement, CEO Age, Succession Planning, Founders, Career Incentives

JEL Classification: G30, G38

Suggested Citation: Suggested Citation

Jagannathan, Murali and Loon, Yee Cheng, Mandatory Retirement Policies for CEOs (December 30, 2011). Available at SSRN: https://ssrn.com/abstract=1536588 or http://dx.doi.org/10.2139/ssrn.1536588