Powerful CEOs and Their Legacy: Evidence from Credit Risk around CEO Turnovers

45 Pages Posted: 13 Apr 2021

See all articles by Marcus V. Braga-Alves

Marcus V. Braga-Alves

Pace University - Lubin School of Business

Iuliana Ismailescu

Pace University - Lubin School of Business

Kaustav Sen

Pace University - Lubin School of Business

Date Written: July 20, 2020

Abstract

In this study, we examine how changes in credit risk around CEO turnover announcements are affected by the nature of the succession (forced vs. voluntary), outgoing CEO’s legacy, and concentration of job titles. We find that firms whose incumbent is forced out experience a greater increase in credit default swap (CDS) spreads than firms with voluntary departures, especially when the influence of the outgoing CEO lingers or the CEO is powerful. These results provide new insights into sources of uncertainty around CEO turnovers and extend the literature on the determinants of CDS spreads around this corporate event.

Keywords: Credit default swaps, credit risk, CEO turnover, CEO legacy, powerful CEO

JEL Classification: G14, G24

Suggested Citation

Braga-Alves, Marcus V. and Ismailescu, Iuliana and Sen, Kaustav, Powerful CEOs and Their Legacy: Evidence from Credit Risk around CEO Turnovers (July 20, 2020). Quarterly Review of Economics and Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3824811

Marcus V. Braga-Alves

Pace University - Lubin School of Business ( email )

1 Pace Plaza
New York, NY 10038-1502
United States

Iuliana Ismailescu (Contact Author)

Pace University - Lubin School of Business ( email )

One Pace Plaza
New York, NY 10038
United States
212-618-6524 (Phone)

Kaustav Sen

Pace University - Lubin School of Business ( email )

1 Pace Plaza
New York, NY 10038-1502
United States
212 618 6413 (Phone)
212 618 6410 (Fax)

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