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The Cyclicality of CEO Turnover

Fisher College of Business Working Paper No. 2019-03-032

Charles A. Dice Working Paper No. 2019-32

51 Pages Posted: 26 Mar 2015 Last revised: 14 Apr 2020

See all articles by Jack Liebersohn

Jack Liebersohn

University of California, Irvine

Heidi A. Packard

University of Michigan at Ann Arbor - Accounting

Date Written: January 31, 2019

Abstract

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

Liebersohn, Jack and Packard, Heidi A., The Cyclicality of CEO Turnover (January 31, 2019). Fisher College of Business Working Paper No. 2019-03-032, Charles A. Dice Working Paper No. 2019-32, Available at SSRN: https://ssrn.com/abstract=2584705 or http://dx.doi.org/10.2139/ssrn.2584705

Jack Liebersohn (Contact Author)

University of California, Irvine ( email )

P.O. Box 19556
Science Library Serials
Irvine, CA 62697-3125
United States

Heidi A. Packard

University of Michigan at Ann Arbor - Accounting ( email )

701 Tappan Street
Ann Arbor, MI 48109-1234
United States

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