Economic Policy Uncertainty and Board Monitoring: Evidence from CEO Turnovers
Journal of Financial Research
44 Pages Posted: 10 Oct 2020
Date Written: May 14, 2020
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: Suggested Citation