The Value of Luck in the Labor Market for CEOs

Amore, Mario Daniele; Schwenen, Sebastian

doi:10.2139/ssrn.3613544

Cited by 1 publication

(1 citation statement)

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“…Using the RD approach outlined above, I do not find any evidence that a positive return outcome induces better firm performance during the subsequent year. Another confounding explanation of the results could be that CEOs of firms with barely positive return outcomes are more likely to leave their firms voluntarily because they may feel more inclined to retire or because other firms may offer them more attractive job opportunities (Amore & Schwenen, 2020). If some of these CEOs who left voluntarily would have been fired in the subsequent year, this phenomenon could lead to the empirical pattern that CEOs are less likely to be fired after their firms produce barely positive return outcomes.…”

Section: Introductionmentioning

confidence: 99%

Uninformative Performance Signals and Forced CEO Turnover

Flepp

2021

SSRN Journal

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This paper provides evidence that corporate boards violate the informativeness principle in their forced CEO turnover decisions by failing to ignore uninformative performance outcome signals. I show that CEOs of firms with barely positive shareholder returns in the previous year are less likely to be dismissed than CEOs of firms with barely negative returns, even though this return outcome is conditionally uninformative. I observe a similar pattern for stock returns relative to the S&P 500 index return: a firm's board is less likely to dismiss its CEO if the firm barely outperformed the S&P 500 index than if the firm barely underperformed the S&P 500 index. Moreover, I demonstrate that the tendency of boards to consider uninformative absolute return outcomes has decreased over time, while their tendency to consider uninformative relative return outcomes has increased over time. This suggests that boards have shifted their focus toward relative returns while continuing to violate the informativeness principle.

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Section: Introductionmentioning

confidence: 99%

Uninformative Performance Signals and Forced CEO Turnover

Flepp

2021

SSRN Journal

View full text Add to dashboard Cite

show abstract

The Value of Luck in the Labor Market for CEOs

Cited by 1 publication

References 70 publications

Uninformative Performance Signals and Forced CEO Turnover

Uninformative Performance Signals and Forced CEO Turnover

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