Abstract
Long CEO tenure can harm firm performance even after the CEO is replaced. We analyze this issue by conditioning post-turnover firm performance on the length of the preceding CEO’s tenure. Identification comes from instrumenting sudden CEO deaths as an exogenous shock to tenure length. We find that when a successor takes over after a long-tenured CEO, operating performance and stock returns are significantly lower, restructuring costs are higher, “big baths” are larger, and firm recovery is slower. Weaker corporate governance and a long-tenured CEO with lower skills amplify these post-turnover effects.
Original language | English |
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Article number | 101072 |
Peer-reviewed scientific journal | Journal of Financial Stability |
Volume | 63 |
Number of pages | 20 |
ISSN | 1572-3089 |
DOIs | |
Publication status | Published - 23.09.2022 |
MoE publication type | A1 Journal article - refereed |
Keywords
- 512 Business and Management
- Corporate Governance
- Managerial tenure
- CEO tenure
- CEO term limits
- restructuring costs
- shareholder value
- firm performance
- hazard model