Effects of CEO Turnover in Banks: Evidence Using Exogenous Turnovers in Indian Banks
68 Pages Posted: 11 Feb 2016 Last revised: 21 Aug 2017
Date Written: February 7, 2017
We examine the effects of CEO turnover in banks. Incoming bank CEOs face problems from information asymmetry because banks' operations are opaque and bank risk can change dramatically in a short time. Incoming bank CEOs may therefore change bank policies to manage their personal risks. Since CEO turnover is usually endogenous, we utilize a setting where CEO turnover is based solely on retirement age and is thus exogenous to bank performance. Consistent with our thesis, incoming CEOs increase provisioning for future delinquencies and shrink lending. Bank stock prices decline following these changes. Politically motivated lending or ever-greening cannot explain our results.
Keywords: Banks, CEO, CEO turnover, Earnings Management, Financial Crisis, Lending, Loans, Retirement, Superannuation, Tenure.
JEL Classification: G20, G21, G30, M41
Suggested Citation: Suggested Citation