Former CEO Directors: Lingering CEOs or Valuable Resources?
Ecole Polytechnique Fédérale de Lausanne; Ecole Polytechnique Fédérale de Lausanne - Swiss Finance Institute
Bernadette A. Minton
Ohio State University (OSU) - Department of Finance
Carrie H. Pan
Santa Clara University - Department of Finance
August 22, 2010
Review of Financial Studies, Forthcoming
Fisher College of Business Working Paper No. 2007-03-004
Charles A. Dice Center Working Paper No. 2007-4
Swiss Finance Institute Research Paper No. 10-11
We investigate corporate governance experts’ claim that it is detrimental to a firm to reappoint former CEOs as directors after they step down as CEOs. We find that more successful and more powerful former CEOs are more likely to be reappointed to the board multiple times after they step down as CEOs. Firms benefit on average from the presence of former CEOs on their boards. Firms with former CEO directors have better accounting performance, have higher relative turnover-performance sensitivity of the successor CEO, and can rehire their former CEO directors as CEOs after extremely poor firm performance under the successor CEOs.
Number of Pages in PDF File: 62
Keywords: CEO turnover, rehired CEO, former CEO, relative performance evaluation
JEL Classification: G14, G34
Date posted: March 19, 2007 ; Last revised: September 27, 2010