Conflict-Induced Forced CEO Turnovers and Firm Performance
Managerial Finance, Forthcoming
44 Pages Posted: 26 Mar 2018
Date Written: March 25, 2018
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: Suggested Citation