Download This PaperCEO Turnover and Director Reputation
83 Pages Posted: 8 Feb 2021 Last revised: 26 Oct 2022
Date Written: March 30, 2022
Abstract
This paper analyzes the reputational effects of forced CEO turnovers on outside directors. 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. Reputational losses are larger for turnovers with a higher potential for disrupting a firm's management, for directors favorably inclined to the CEO, and for directors with a committee-based responsibility for monitoring the CEO. Our results imply that the average forced CEO turnover signals a governance failure at the board level, and that shareholders rely on salient actions to update their beliefs about directors' hidden qualities.
Keywords: CEO turnover, director elections, director reputation, CEO succession, shareholder voting
JEL Classification: G32, G34
Suggested Citation: Suggested Citation
Jonas Romer
University of St. Gallen - Swiss Institute of Banking and Finance ( email )
Rosenbergstrasse 52
St. Gallen, CH-9000
Switzerland
Markus Schmid (Contact Author)
University of St. Gallen - Swiss Institute of Banking and Finance ( email )
Unterer Graben 21
St. Gallen, 9000
Switzerland
University of St. Gallen - School of Finance ( email )
Unterer Graben 21
St.Gallen, CH-9000
Switzerland
Swiss Finance Institute
c/o University of St. Gallen
Dufourstrassse 50
St. Gallen, SG 9000
Switzerland