Former CEO Directors: Lingering CEOs or Valuable Resources?

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

62 Pages Posted: 19 Mar 2007 Last revised: 27 Sep 2010

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: August 22, 2010

Abstract

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.

Keywords: CEO turnover, rehired CEO, former CEO, relative performance evaluation

JEL Classification: G14, G34

Suggested Citation

Fahlenbrach, Rüdiger and Minton, Bernadette A. and Pan, Carrie H., Former CEO Directors: Lingering CEOs or Valuable Resources? (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. Available at SSRN: https://ssrn.com/abstract=969823

Rüdiger Fahlenbrach (Contact Author)

Ecole Polytechnique Fédérale de Lausanne ( email )

Quartier UNIL-Dorigny
Extranef 211
1015 Lausanne, CH-1015
Switzerland
++41-21-693-0098 (Phone)
++41-21-693-3010 (Fax)

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

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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