Economic Policy Uncertainty and Board Monitoring: Evidence from CEO Turnovers

Journal of Financial Research

44 Pages Posted: 10 Oct 2020

See all articles by Melissa B. Frye

Melissa B. Frye

University of Central Florida - College of Business Administration

Duong Pham

Georgia Southern University - Department of Finance and Economics

Date Written: May 14, 2020

Abstract

We examine whether economic policy uncertainty (EPU) affects a board’s chief executive officer (CEO) replacement decision. We find that high EPU reduces the likelihood of forced CEO turnover. Our results support the idea that performance assessment may be more difficult when uncertainty is high. We provide evidence that succession planning may be important to firms in reducing the effects of EPU, as firms with an identifiable heir apparent are not influenced by high EPU. Likewise, voluntary CEO turnovers are not affected by EPU. Overall, our results provide evidence that boards make personnel decisions in response to external macroeconomic pressures.

Keywords: Economic Policy Uncertainty, CEO Turnover

JEL Classification: G30, G34

Suggested Citation

Frye, Melissa and Pham, Duong, Economic Policy Uncertainty and Board Monitoring: Evidence from CEO Turnovers (May 14, 2020). Journal of Financial Research, Available at SSRN: https://ssrn.com/abstract=3678649 or http://dx.doi.org/10.2139/ssrn.3678649

Melissa Frye (Contact Author)

University of Central Florida - College of Business Administration ( email )

P.O. Box 161400
Department of Finance
Orlando, FL 32816
United States
407-823-3097 (Phone)

Duong Pham

Georgia Southern University - Department of Finance and Economics ( email )

P.O. Box 8152
Statesboro, GA 30460
United States

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