Back in Style (Limited Edition): Contrasts in Style and CEO Impact on Corporate Policy

34 Pages Posted: 11 Nov 2012 Last revised: 31 Oct 2013

See all articles by Igor Cunha

Igor Cunha

University of Kentucky

Rafael P. Ribas

University of Amsterdam - Finance Group

Date Written: November 11, 2012


This paper proposes a new approach to study how corporate policies change upon the replacement of the CEO. We employ empirical Bayes simultaneous tests on the executive fixed effects and find a significant heterogeneity in their styles. Furthermore, we implement a measure that explores the differences in styles between the exiting CEO and the incoming CEO. This comparison reveals that corporate policies change before and after a turnover. Moreover, some changes are not immediate, so we estimate how fast the firm policy converges to the new equilibrium. For the most part, our results are not significantly different if we consider exogenous turnovers (e.g., death, illness, and natural retirements). Thus the relationship between CEO turnover and subsequent corporate policy is not only driven by the event itself, but it is also largely determined by the contrasts between CEOs’ characteristics.

Keywords: Managerial style, CEO turnover, CEO fixed effects, financing decisions, investment decisions, corporate policy

JEL Classification: G30, G31, G32, M12

Suggested Citation

Cunha, Igor and Ribas, Rafael Perez, Back in Style (Limited Edition): Contrasts in Style and CEO Impact on Corporate Policy (November 11, 2012). Available at SSRN: or

Igor Cunha (Contact Author)

University of Kentucky ( email )

Gatton College of Business and Economics
550 S. Limestone
Lexington, KY 40526
United States
859-257-5703 (Phone)

Rafael Perez Ribas

University of Amsterdam - Finance Group ( email )

Plantage Muidergracht 12
Room M 3.06
Amsterdam, 1018 TV

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