69 Pages Posted: 22 Oct 2013 Last revised: 10 Apr 2017
Date Written: April 7, 2017
We study the role of the contractual time horizon of CEOs for CEO turnover and risk taking. Using hand-collected data on 3,954 fixed-term CEO contracts, we show that remaining time under contract systematically relates to CEO turnover probability. When contracts are close to expiration, turnover is more likely and is more sensitive to performance. We show a positive within-CEO relation between remaining time under contract and risk. Our results are similar across short and long contracts and are driven by neither firm or CEO survival, nor technological cycles. They are consistent with risk-taking incentives provided by a long-term contract horizon.
Keywords: Risk taking, volatility, career concerns, CEO contracts, CEO turnover
JEL Classification: G34, J41, J63
Suggested Citation: Suggested Citation
Cziraki, Peter and Groen-Xu, Moqi, CEO Turnover and Risk Taking under Long-Term Employment Contracts (April 7, 2017). Available at SSRN: https://ssrn.com/abstract=2343541 or http://dx.doi.org/10.2139/ssrn.2343541
By Kevin Murphy