Ceo Turnover

This thesis examines the effect of CEO attributes and company fundamentals on company performance in CEO turnovers. The analyses were performed on a sample of 899 CEO turnovers between 2003 and 2009 in companies listed on the S&P 1500 composite index in the US. A six-step model exploring various perspectives of the CEO turnover in the period [Event day -1/+2 years] finds that the market, on average, yields negative announcement return and then positive cumulative abnormal return in the subsequent two years. Our main finding is that the market reacts to changes made to the company fundamentals, and that it generally rewards changes in company fundamentals contributing to enhance the robustness of the companies’ balance sheets. We find that MBAs tend to run the operations with lesser margins, in terms of balance sheet robustness. Nonetheless, the different behavior between MBAs and engineers does not explain the market reaction. Even though MBAs and engineers have different fiscal strategies in the way they operate companies, the abnormal return is not sensitive to hiring a CEO with these educational profiles alone. It is rather the experience, and the fact that CEOs, on average, are able to introduce changes that fit the companies’ needs that appear to generate abnormal reactions in stock value. We also find that positive abnormal stock return in the transition year materializes in increased ROA and EBITDA margin in the two subsequent years. This confirms that the market is able to identify CEO turnovers that prove successful. This thesis confirms several previous findings within the research field of CEO turnover, and adds to the understanding of the underlying reasons for market reactions to CEO turnovers.

This paper explores how prominent VCs affect CEO replacement in startups. Defining prominence using eigenvector centrality, we employ matching methods and instrumental variables to show that start-up CEO replacement occurs more often, and faster, when prominent VCs participate. We further explore these VCs' comparative advantage in managing CEO turnover, finding that the prominent VC effects increase as replacement costs rise, such as when incumbent CEOs are entrenched or possess specialized technology know-how, or startups are early stage. When prominent VCs participate, replacement CEOs are disproportionately experienced outsiders-external hires who possess prior startup-CEO experience. Our results reveal that CEO turnover is associated with increases in startups' ex post innovation and survival performance, with experienced outsider CEO replacements showing the strongest survival rates.