The Impact of Firm Performance Expectations on CEO Turnover and Replacement Decisions

Posted: 2 Dec 2003

See all articles by Kathleen A. Farrell

Kathleen A. Farrell

University of Nebraska-Lincoln

David A. Whidbee

Washington State University - Department of Finance, Insurance and Real Estate

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Abstract

Our analysis suggests that boards focus on deviation from expected performance, rather than performance alone, in making the CEO turnover decision, especially when there is agreement (less dispersion) among analysts about the firm's earnings forecast or there are a large number of analysts following the firm. In addition, our results suggest that boards are more likely to appoint a CEO that will change firm policies and strategies (i.e., an outsider) when forecasted five-year EPS growth is low and there is greater uncertainty (more dispersion) among analysts about the firm's long-term forecasts.

Keywords: CEO turnover, analyst forecasts, earnings announcements

JEL Classification: G30, G34, G29, M41

Suggested Citation

Farrell, Kathleen A. and Whidbee, David A., The Impact of Firm Performance Expectations on CEO Turnover and Replacement Decisions. Journal of Accounting & Economics, Vol. 36, Nos. 1-3, pp. 165-196, December 2003. Available at SSRN: https://ssrn.com/abstract=473900

Kathleen A. Farrell (Contact Author)

University of Nebraska-Lincoln ( email )

238 CBA
Lincoln, NE 68588-0490
United States
402-472-3005 (Phone)
402-472-5140 (Fax)

David A. Whidbee

Washington State University - Department of Finance, Insurance and Real Estate ( email )

Todd 470
Pullman, WA 99164-4746
United States
509-335-3098 (Phone)
509-335-3857 (Fax)

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