CEO Turnover in Large Banks: Does Tail Risk Matter?

52 Pages Posted: 11 May 2017

See all articles by Abhishek Srivastav

Abhishek Srivastav

University of Leeds - Division of Accounting and Finance

Kevin Keasey

University of Leeds - Division of Accounting and Finance

Sabur Mollah

Sheffield University Management School, University of Sheffield; Swansea Management School, Swansea University; Hull University Business School; Hull University Business School

Francesco Vallascas

University of Leeds - Division of Accounting and Finance

Date Written: May 10, 2017

Abstract

Using a unique international dataset, we show that the CEOs of large banks exhibit an increased probability of forced turnover when their organizations are more exposed to idiosyncratic tail risks. The importance of idiosyncratic tail risk in CEO dismissals is strengthened when there is more competition in the banking industry and when stakeholders have more to lose in the case of distress. Overall, we document that the exposure to idiosyncratic tail risk offers valuable signals to bank boards on the quality of the choices made by CEOs and these signals are different from those provided by accounting and market measures of bank performance and by idiosyncratic volatility. In contrast, systematic tail risk is usually filtered out from the firing decision, only becoming important for forced CEO turnovers in the presence of a major variation in the costs that the exposure to this risk generates for shareholders and the organization.

Keywords: G21, G28

JEL Classification: Tail Risk, CEO Turnover, Bank Governance

Suggested Citation

Srivastav, Abhishek and Keasey, Kevin and Mollah, Sabur and Vallascas, Francesco, CEO Turnover in Large Banks: Does Tail Risk Matter? (May 10, 2017). Leeds University Business School Working Paper No. 18-01. Available at SSRN: https://ssrn.com/abstract=2966033 or http://dx.doi.org/10.2139/ssrn.2966033

Abhishek Srivastav

University of Leeds - Division of Accounting and Finance ( email )

Leeds LS2 9JT
United Kingdom

Kevin Keasey

University of Leeds - Division of Accounting and Finance ( email )

Leeds LS2 9JT
United Kingdom
+44 (0)113 343 2618 (Phone)

Sabur Mollah

Sheffield University Management School, University of Sheffield ( email )

Conduit Road
Sheffield, Sheffield S10 1FL
United Kingdom

Swansea Management School, Swansea University ( email )

Singleton Park
Swansea, Wales SA2 8PP
United Kingdom

Hull University Business School ( email )

Cottingham Road
Hull, Great Britain HU6 7RX
United Kingdom

Hull University Business School ( email )

Cottingham Road
Hull, Hull HU6 7RX
United Kingdom

Francesco Vallascas (Contact Author)

University of Leeds - Division of Accounting and Finance ( email )

Leeds LS2 9JT
United Kingdom

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