Equity Issuance, CEO Turnover and Corporate Governance

24 Pages Posted: 29 Oct 2005

See all articles by Scott C. Linn

Scott C. Linn

University of Oklahoma - Michael F. Price College of Business

Patrick McColgan

University of Strathclyde

David Hillier

University of Strathclyde - Department of Accounting and Finance

Abstract

There is substantial evidence on the effect of external market discipline on chief executive turnover decisions in poorly performing companies. In this study we present evidence on the role of institutional monitoring in these decisions through the equity issuance process. We find that firms which undertake equity offerings are associated with an increased rate of forced CEO turnover that is focused on the managers of poorly performing companies. At the same time, equity offerings increase the likelihood of a new CEO being appointed from outside the current management team. We also provide evidence that independent boards are more likely to forcibly remove CEOs from their position, although this is not conditional on poor performance.

Suggested Citation

Linn, Scott C. and McColgan, Patrick and Hillier, David, Equity Issuance, CEO Turnover and Corporate Governance. European Financial Management, Vol. 11, No. 4, pp. 515-538, September 2005. Available at SSRN: https://ssrn.com/abstract=801909

Scott C. Linn

University of Oklahoma - Michael F. Price College of Business ( email )

307 West Brooks
Norman, OK 73019-4004
United States
405-325-3444 (Phone)
405-325-1957 (Fax)

Patrick McColgan

University of Strathclyde ( email )

Curran Building
100 Cathedral Street
Glasgow, G4 0LN
United Kingdom
+44 1415483690 (Phone)

David Hillier (Contact Author)

University of Strathclyde - Department of Accounting and Finance ( email )

Curran Building
100 Cathedral Street
Glasgow G4 0LN
United Kingdom
44 0141 330 4809 (Phone)
44 0141 330 4442 (Fax)

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