Journal of Finance Vol. 70 No. 5 2015

CEO Turnover and Relative Performance Evaluation

Dirk Jenter^1,2,3,4; FADI KANAAN^1,2

¹ Goethe University Frankfurt · ² National Bureau of Economic Research · ³ University of Illinois Urbana-Champaign · ⁴ Stanford University

Abstract

This paper shows that CEOs are fired after bad firm performance caused by factors beyond their control. Standard economic theory predicts that corporate boards filter out exogenous industry and market shocks from firm performance before deciding on CEO retention. Using a hand‐collected sample of 3,365 CEO turnovers from 1993 to 2009, we document that CEOs are significantly more likely to be dismissed from their jobs after bad industry and, to a lesser extent, after bad market performance. A decline in industry performance from the 90 th to the 10 th percentile doubles the probability of a forced CEO turnover.

DOI

10.1111/jofi.12282

Volume

70

Issue

5

Pages

2155-2184

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

APA 7 MLA 9 Chicago (author–date) Harvard Elsevier Harvard (JFE, JBF…) The Accounting Review Academy of Management American Marketing Association INFORMS (Management Science) Copy citation Copied ✓