Homroy, Swarnodeep (2012) “Are CEOs replaced for Poor Performance? Effects of Mergers and Acquisitions on CEO Turnover”. In: EALE, 2012-09-212012-09-23, Bonn. (Submitted)
This study analyses the changing hazards of CEO exit in the period 1992-2010 and estimates the effects of firm performance, strength of governance and Mergers and Acquisitions on the hazards. Using discrete duration models, I provide evidence the sample period is characterized by secular increase of turnover hazards and shortening tenure for CEOs of S&P 1500 firms. My findings suggest an increasing performance sensitivity of CEO turnover over the last two decades and that smaller and more independent board increases the hazards of exit. M&A increases the hazard of turnover for non-performing managers. I find that acquisitions increases the hazard of CEO turnover more than mergers and that international M&A are associated with higher hazards of CEO exit than domestic M&A. Evidence of CEO entrenchment is observed in the lower hazard and performance sensitivity of turnover for Chairman-CEOs and CEOs with high equity ownership in the firm. I find evidence that post Sarbanes-Oxley act of 2002(SOX), CEOs face a higher hazard of turnover which indicates positive impact of recent corporate governance regulations on managerial discipline.
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