Conflict-Induced Forced CEO Turnovers and Firm Performance

Managerial Finance, Forthcoming

44 Pages Posted: 26 Mar 2018

See all articles by Kuntara Pukthuanthong

Kuntara Pukthuanthong

University of Missouri, Columbia

Saif Ullah

Concordia University

Thomas John Walker

Concordia University, Quebec - Department of Finance

Jing Zhang

Concordia University, Quebec - John Molson School of Business

Date Written: March 25, 2018

Abstract

We examine operational and stock performance changes around forced CEO turnovers caused by conflicts between corporate boards and CEOs over the strategic direction of the firm. These CEO turnovers tend to be preceded by significant declines and followed by significant improvements in firm performance. Firms appear to become more focused on fewer business segments and become bigger players in those segments after the turnover. Firms whose ousted CEOs are succeeded by insiders outperform those with outsider successions. In addition, they do not exhibit decreased performance before the turnover, suggesting that insiders take over the reins only when the firms has been already performing well. Long-term compensation incentives and firm size are found to increase firm performance after the turnover.

Keywords: Strategic Direction, Strategy Formation, Forced CEO Turnovers, Firm Performance

JEL Classification: G12, G14, G30

Suggested Citation

Pukthuanthong, Kuntara and Ullah, Saif and Walker, Thomas John and Zhang, Jing, Conflict-Induced Forced CEO Turnovers and Firm Performance (March 25, 2018). Managerial Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3149208

Kuntara Pukthuanthong (Contact Author)

University of Missouri, Columbia ( email )

Robert J. Trulaske, Sr. College of Business
403 Cornell Hall
Columbia, MO 65211
United States
6198076124 (Phone)

HOME PAGE: https://www.kuntara.net/

Saif Ullah

Concordia University ( email )

1455 de Maisonneuve Blvd. W.
Montreal, Quebec H3G 1MB
Canada

Thomas John Walker

Concordia University, Quebec - Department of Finance ( email )

Montreal, Quebec H3G 1M8
Canada

Jing Zhang

Concordia University, Quebec - John Molson School of Business ( email )

1455 de Maisonneuve Blvd. W.
Montreal, Quebec H3G 1M8
Canada

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