CEO Turnover and Director Reputation
University of St.Gallen, School of Finance Research Paper No. 2021/06
Proceedings of the EUROFIDAI-ESSEC Paris December Finance Meeting 2022
84 Pages Posted: 8 Feb 2021 Last revised: 12 Dec 2024
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CEO Turnover and Director Reputation
CEO Turnover and Director Reputation
Date Written: February 16, 2024
Abstract
This paper analyzes the reputational effects of forced CEO turnovers on outside directors. We find that directors interlocked to a forced CEO turnover experience large and persistent increases in withheld votes at subsequent re-elections relative to non-turnover-interlocked directors. Directors are not penalized for an involvement in a turnover per se but for forced CEO turnovers that are related to governance failures by the board. Our results challenge the widespread view that forcing out a CEO can generally be understood as a sign of a well-functioning corporate governance.
Keywords: CEO turnover, director elections, director reputation, CEO succession, shareholder voting
JEL Classification: G32, G34
Suggested Citation: Suggested Citation