How Does Forced CEO Turnover Experience Affect Directors?

Journal of Financial and Quantitative Analysis (Forthcoming)

49 Pages Posted: 31 Dec 2014 Last revised: 23 Mar 2020

See all articles by Jesse A. Ellis

Jesse A. Ellis

North Carolina State University

Lixiong Guo

University of Alabama

Shawn Mobbs

University of Alabama - Culverhouse College of Business Administration

Date Written: January 22, 2020

Abstract

We study changes in independent director behavior and labor market outcomes after experiencing a forced CEO turnover. We find they are more willing to fire CEOs of underperforming firms, hire outside CEOs after a firing and encourage better board meeting attendance by fellow directors. We also find that shareholders of poorly performing firms react positively when experienced directors join the board. It does come with a small cost for directors, in terms of additional directorships, though the cost is not as great as that for directors who do not fire the CEO of a poorly performing firm.

Keywords: CEO turnover, director experience, director learning, board monitoring, incentives, labor market

JEL Classification: G30, G34

Suggested Citation

Ellis, Jesse A. and Guo, Lixiong and Mobbs, Shawn, How Does Forced CEO Turnover Experience Affect Directors? (January 22, 2020). Journal of Financial and Quantitative Analysis (Forthcoming), Available at SSRN: https://ssrn.com/abstract=2543716 or http://dx.doi.org/10.2139/ssrn.2543716

Jesse A. Ellis

North Carolina State University ( email )

Poole College of Management
Campus Box 7229
Raleigh, NC 27695
United States
919-515-9670 (Phone)

Lixiong Guo

University of Alabama ( email )

Culverhouse College of Business
Tuscaloosa, AL 35487-0223
United States

Shawn Mobbs (Contact Author)

University of Alabama - Culverhouse College of Business Administration ( email )

101 Paul W. Bryant Dr.
Box 870382
Tuscaloosa, AL 35487
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
464
Abstract Views
2,837
rank
79,311
PlumX Metrics