CEO Turnover and Political Repositioning

32 Pages Posted: 26 Jun 2017

See all articles by Yosef Bonaparte

Yosef Bonaparte

University of Colorado at Denver - Department of Finance

Date Written: June 22, 2017

Abstract

This paper examines the relation between political regime change, a new president from a new party, and propensity for CEO turnover. Our key conjecture is that some companies, especially those that are politically sensitive, will politically reposition to adapt to the new political regime, and this political repositioning will be reflected in increased CEO turnover. We find support for this hypothesis, for CEO turnover is at least 24% more likely to happen following political regime change. The economic significance of this CEO political repositioning varies by company characteristics, with repositioning greater among large cap stocks, stocks held by short term investors, and sectors that are politically sensitive. However, political repositioning decreases stock performance relative to the sector, though this effect is weakly significant. These results suggest that political regime change causes firms to reevaluate the required skills of the CEO. Collectively, we find that political repositioning is an important determinant of CEO turnover.

Keywords: CEO turnover and political repositioning

JEL Classification: G02, G11, G12

Suggested Citation

Bonaparte, Yosef, CEO Turnover and Political Repositioning (June 22, 2017). Available at SSRN: https://ssrn.com/abstract=2991032 or http://dx.doi.org/10.2139/ssrn.2991032

Yosef Bonaparte (Contact Author)

University of Colorado at Denver - Department of Finance ( email )

United States

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