Investor Myopia and CEO Turnover: Evidence from Private Firms
Abstract
We provide a large sample comparison of CEO turnover in public and private firms in order to gain insight into whether and how corporate governance environments influence CEO firing and hiring decisions. We show that public firms have higher CEO turnover rates and exhibit higher CEO turnover performance sensitivity than private firms. Public firms are less likely to hire external CEOs than private firms, especially less likely to hire external CEOs from private firms. Finally, we show that the performance improvement around CEO turnover is more evident for private firms than for public firms. We conclude that, contrary to some arguments, public firm CEOs are fired too frequently, possibly due to investor myopia creating pressure on public firm boards. The evidence of segmentation in the CEO labor market provides an explanation for how differing turnover risks can persist in public versus private firms.
This event is an Erasmus Finance Seminar. The Erasmus Finance Seminar series brings prominent researchers in Finance from all over the world to Rotterdam.
