Aggressive Boards and CEO Turnover

Journal of Accounting Research, Vol. 59, No. 2, 2021

81 Pages Posted: 3 Feb 2021 Last revised: 15 Jul 2021

Multiple version iconThere are 2 versions of this paper

Date Written: January 4, 2021

Abstract

This study investigates a communication game between a CEO and a board of directors where the CEO's career concerns can potentially impede value-increasing informative communication. By adopting a policy of aggressive boards (excessive replacement), shareholders can facilitate communication between the CEO and the board. The results are in contrast to the multitude of models which generally find that management-friendly boards improve communication, and help to explain empirical results concerning CEO turnover. The results also provide the following novel predictions concerning variation in CEO turnover: (i) there is greater CEO turnover in firms or industries where CEO performance is relatively more difficult to assess; (ii) the board is more aggressive in their replacement of the CEO in industries or firms where the board's advisory role is more salient; and (iii) there is comparatively less CEO turnover in firms or industries where the variance of CEO talent is high.

Keywords: Corporate Governance, Advising, CEO Replacement, Communication, CEO Turnover, Board Independence

JEL Classification: C72, D82, D83, G34, M41, M51

Suggested Citation

Aghamolla, Cyrus and Hashimoto, Tadashi, Aggressive Boards and CEO Turnover (January 4, 2021). Journal of Accounting Research, Vol. 59, No. 2, 2021, Available at SSRN: https://ssrn.com/abstract=3760170 or http://dx.doi.org/10.2139/ssrn.3760170

Cyrus Aghamolla (Contact Author)

Rice University

6100 South Main Street
MS-531
Houston, TX 77005-1892
United States

Tadashi Hashimoto

Yeshiva University ( email )

500 West 185th Street
New York, NY NEW YORK 10033
United States

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