The Cyclicality of CEO Turnover
Charles A. Dice Working Paper No. 2019-32
51 Pages Posted: 26 Mar 2015 Last revised: 14 Apr 2020
Date Written: January 31, 2019
CEO turnover is highly pro-cyclical. This paper aims to explain why. We begin by showing that the cyclicality is driven almost entirely by executives of retirement age. We further provide evidence that executives time their retirement to maximize the value of their pensions. Since CEO pay is pro-cyclical and pensions are based on pay in the final years of tenure, executives have the incentive to retire when the economy is doing well. Cyclicality is particular strong in firms with strong corporate governance, which suggests that retirement cyclicality is a tool firms use to constrain CEO behavior.
JEL Classification: M12, J26, M51
Suggested Citation: Suggested Citation