Are Generalists Beneficial to Corporate Shareholders? Evidence from Exogenous Executive Turnovers

72 Pages Posted: 23 Mar 2017 Last revised: 14 Oct 2018

See all articles by André Betzer

André Betzer

University of Wuppertal - Schumpeter School of Business and Economics

Hye Seung (Grace) Lee

Fordham University - Accounting Area

Peter Limbach

University of Cologne and Centre for Financial Research (CFR)

Jesus M. Salas

Lehigh University

Date Written: March 23, 2017

Abstract

This study finds a positive, economically meaningful impact of generalist chief executive officers (CEOs) on shareholder value using 164 sudden deaths and 345 non-sudden exogenous turnovers. The higher a departing CEO’s general ability index (GAI), independently and relative to her successor, the lower is the abnormal stock return to turnover announcements. Returns reflect post-turnover changes in operating performance. Further, CEOs’ and successors’ GAIs are significantly positively related, but only for non-sudden turnovers. Consistently, for sudden deaths we find positive stock returns to appointments of generalist successors. The results provide a market-based explanation for the generalist pay premium.

Keywords: executive heterogeneity, managerial work experience, firm value

JEL Classification: G30, G34, J24

Suggested Citation

Betzer, André and Lee, Hye Seung (Grace) and Limbach, Peter and Salas, Jesus M., Are Generalists Beneficial to Corporate Shareholders? Evidence from Exogenous Executive Turnovers (March 23, 2017). Journal of Financial and Quantitative Analysis (JFQA), Forthcoming. Available at SSRN: https://ssrn.com/abstract=2939486 or http://dx.doi.org/10.2139/ssrn.2939486

André Betzer (Contact Author)

University of Wuppertal - Schumpeter School of Business and Economics ( email )

Gaußstraße 20
Wuppertal
Germany

HOME PAGE: http://finance.uni-wuppertal.de/index.php?id=1153

Hye Seung (Grace) Lee

Fordham University - Accounting Area ( email )

Graduate School of Business
113 W. 60th Street
New York, NY 10023
United States

Peter Limbach

University of Cologne and Centre for Financial Research (CFR) ( email )

Albertus-Magnus-Platz
Köln, 50923
Germany

HOME PAGE: http://www.finance.uni-koeln.de

Jesus M. Salas

Lehigh University ( email )

Bethlehem, PA 18015
United States
610-758-3238 (Phone)

HOME PAGE: http://www3.lehigh.edu/business/faculty/salas.asp

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