CEO Turnover in a Competitive Assignment Framework

64 Pages Posted: 23 Apr 2010 Last revised: 23 Apr 2014

See all articles by Andrea L. Eisfeldt

Andrea L. Eisfeldt

UCLA Anderson School of Management

Camelia M. Kuhnen

University of North Carolina Kenan-Flagler Business School & NBER

Date Written: April 23, 2010

Abstract

There is widespread concern about whether Chief Executive Officers (CEOs) are appropriately punished for poor performance. While CEOs are more likely to be forced out if their performance is poor relative to the industry average, overall industry performance also matters. This seems puzzling if termination is disciplinary, however, we show that both absolute and relative performance-driven turnover can be natural and efficient outcomes in a competitive assignment model in which CEOs and firms form matches based on multiple characteristics. The model also has new predictions about replacement managers’ equilibrium pay and performance. We document CEO turnover events during 1992–2006 and provide empirical support for our model.

Keywords: Executive Turnover, Matching Models, Competitive Assignment, CEO Labor Market

JEL Classification: G30, J31, M51, J41, J44, J63

Suggested Citation

Eisfeldt, Andrea L. and Kuhnen, Camelia M., CEO Turnover in a Competitive Assignment Framework (April 23, 2010). Journal of Financial Economics (JFE), No. 109, 2013. Available at SSRN: https://ssrn.com/abstract=1594785 or http://dx.doi.org/10.2139/ssrn.1594785

Andrea L. Eisfeldt

UCLA Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

HOME PAGE: http://https://sites.google.com/site/andrealeisfeldt/

Camelia M. Kuhnen (Contact Author)

University of North Carolina Kenan-Flagler Business School & NBER ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States
(919) 9623284 (Phone)

HOME PAGE: http://public.kenan-flagler.unc.edu/faculty/kuhnenc/

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