The Market for Comeback CEOs

45 Pages Posted: 9 Mar 2007  

Rüdiger Fahlenbrach

Ecole Polytechnique Fédérale de Lausanne; Ecole Polytechnique Fédérale de Lausanne - Ecole Polytechnique Fédérale de Lausanne

Bernadette A. Minton

Ohio State University (OSU) - Department of Finance

Carrie H. Pan

Santa Clara University - Department of Finance

Date Written: February 2007

Abstract

We study the determinants and valuation consequences of rehiring a former CEO. Rehiring is more likely after poor performance of the current CEO, if the former CEO performed well during his prior tenure and maintains strong connections to the firm, and the more intangible are the firm's assets. While the market reacts negatively to the rehiring announcement, the accounting and stock market performances of rehired CEO firms do not differ from those of a control sample over the two years following the turnover. Our evidence suggests that firms rehiring their former CEOs hire the best available candidate given the circumstances.

Keywords: CEO turnover, boomerang CEO, managerial effects, entrenchment

JEL Classification: G14, G34

Suggested Citation

Fahlenbrach, Rüdiger and Minton, Bernadette A. and Pan, Carrie H., The Market for Comeback CEOs (February 2007). AFA 2008 New Orleans Meetings Paper. Available at SSRN: https://ssrn.com/abstract=968670 or http://dx.doi.org/10.2139/ssrn.968670

Rüdiger Fahlenbrach

Ecole Polytechnique Fédérale de Lausanne ( email )

Quartier UNIL-Dorigny
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1015 Lausanne, CH-1015
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HOME PAGE: http://sfi.epfl.ch/fahlenbrach.html

Ecole Polytechnique Fédérale de Lausanne - Ecole Polytechnique Fédérale de Lausanne ( email )

c/o University of Geneve
40, Bd du Pont-d'Arve
1211 Geneva, CH-6900
Switzerland

Bernadette A. Minton (Contact Author)

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

2100 Neil Avenue
Columbus, OH 43210-1144
United States
614-688-3125 (Phone)
614-292-2359 (Fax)

Carrie H. Pan

Santa Clara University - Department of Finance ( email )

Santa Clara, CA 95053
United States
(408)5517188 (Phone)

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