CEO Turnover and the Firm's Investment Decisions

Posted: 3 Aug 1999

See all articles by Michael S. Weisbach

Michael S. Weisbach

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Date Written: April 1994

Abstract

This paper examines the relation between management turnover and divestitures of recently acquired divisions. The empirical results indicate that at the time of a management change, there is an increased probability of divesting an acquisition at a loss or one considered unprofitable by the press. The probability increases by about the same amount regardless of whether the change is an apparent age-65 retirement or a resignation. Overall, the results are consistent with a variety of agency-based theories of corporate investment and suggest that management changes are important events for corporations because they lead to reversals of poor prior decisions.

JEL Classification: G34

Suggested Citation

Weisbach, Michael S., CEO Turnover and the Firm's Investment Decisions (April 1994). Available at SSRN: https://ssrn.com/abstract=5508

Michael S. Weisbach (Contact Author)

Ohio State University (OSU) - Department of Finance ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

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