Personal Costs of Executive Turnovers
50 Pages Posted: 3 Mar 2017
Date Written: October 2015
This study examines how costly forced turnover is for the CEO using income data from the official records at the Danish Tax Authorities. We find that ousted CEOs’ personal income is 40% lower in the five years following forced turnovers. The decline is driven by labor market outcomes: Labor and entrepreneurial incomes decline, while financial incomes increase. Consistent with the executive labor market being the main channel for the lower income, we find larger declines in income for executives with poor idiosyncratic firm performance during their tenures. Overall, the findings suggest that forced executive turnover is an important internal corporate governance mechanism.
Keywords: Executive turnover, Executive compensation, Corporate governance, Agency costs
JEL Classification: G3, G30
Suggested Citation: Suggested Citation