Product Market Competition Shocks, Firm Performance, and Forced CEO Turnover

63 Pages Posted: 4 Dec 2014 Last revised: 18 Jul 2016

See all articles by Sudipto Dasgupta

Sudipto Dasgupta

Chinese University of Hong Kong and CEPR

Xi Li

University of Arkansas - Department of Finance

Yan Albert Wang

Auburn University

Date Written: July 10, 2016

Abstract

We examine the effect of competition shocks induced by major industry-level tariff cuts on forced CEO turnover. Both the likelihood of forced CEO turnover and its sensitivity to performance increase, particularly for firms with low productivity and high default risk. While CEO’s incentive pay and pay-performance sensitivity increase in firms with strong governance, CEOs are more likely to be forced out in firms with weak governance, especially if there is director turnover. New outside CEOs receive higher incentive pay and have experience in firms with lower cost structures and higher asset sales. Performance and productivity improve after forced turnover.

Keywords: Product Market Competition; Forced CEO Turnover; Corporate Governance

JEL Classification: J33, J41, J63, M4, L1, L2

Suggested Citation

Dasgupta, Sudipto and Li, Xi and Wang, Yan Albert, Product Market Competition Shocks, Firm Performance, and Forced CEO Turnover (July 10, 2016). Available at SSRN: https://ssrn.com/abstract=2517452 or http://dx.doi.org/10.2139/ssrn.2517452

Sudipto Dasgupta (Contact Author)

Chinese University of Hong Kong and CEPR ( email )

CUHK, Cheng Yu Tung Building, Room 1224
Shatin, NT
Hong Kong
Hong Kong

Xi Li

University of Arkansas - Department of Finance ( email )

Fayetteville, AR 72701
United States

Yan Albert Wang

Auburn University ( email )

315 Lowder Hall
Department of Finance
Auburn, AL 36849
United States

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