The Impact of Firm Performance Expectations on CEO Turnover and Replacement Decisions

Farrell, Kathleen A.; Whidbee, David A.

doi:10.2139/ssrn.318968

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The Impact of Firm Performance Expectations on CEO Turnover and Replacement Decisions

54 Pages Posted: 6 Jan 2004

See all articles by Kathleen A. Farrell

David A. Whidbee

Washington State University - Department of Finance, Insurance and Real Estate

There are 2 versions of this paper

Date Written: May 2003

Abstract

Our analysis suggests that boards focus on deviation from expected performance, rather than performance alone, in making the CEO turnover decision, especially when there is agreement (less dispersion) among analysts about the firm's earnings forecast or there are a large number of analysts following the firm. In addition, our results suggest that boards are more likely to appoint a CEO that will change firm policies and strategies (i.e., an outsider) when forecasted five-year EPS growth is low and there is greater uncertainty (more dispersion) among analysts about the firm's long-term forecasts.

Keywords: CEO turnover, analyst forecast, earnings announcements

JEL Classification: G29, G30, G34, M41

Suggested Citation: Suggested Citation

Farrell, Kathleen A. and Whidbee, David A., The Impact of Firm Performance Expectations on CEO Turnover and Replacement Decisions (May 2003). Available at SSRN: https://ssrn.com/abstract=318968 or http://dx.doi.org/10.2139/ssrn.318968