Journal of Financial and Quantitative Analysis Vol. 58 No. 6 2023
Do Directors Respond to Stock Mispricing? Evidence from CEO Turnovers
open access
Abstract
This article examines whether and how stock mispricing can affect the probability of CEO turnover. In a sample of 1,573 US public firms, I find that, after controlling for fundamental performance, a 1-standard-deviation negative uninformative stock price shock increases the likelihood of CEO turnover by 10%. The mispricing-turnover sensitivity is stronger at firms with an independent board, and a difference-in-difference analysis further supports that finding. Ancillary results suggest that independent directors’ career concerns may play a role in the response of independent boards to mispricing.
- DOI
- 10.1017/s0022109022001193
- Volume
- 58
- Issue
- 6
- Pages
- 2732-2751
- Language
- en
- Sources
- bibtex:phds-export.bib crossref openalex