Performance Surprises and Uncertain Managerial Ability: Evidence from CEO Turnovers
Speaker
Abstract
| We document that the likelihood of CEO turnover increases in the series of past quarterly earnings decreases and negative analysts’ forecast errors. This relation declines over a CEO’s tenure, consistent with accounting earnings revealing information about uncertain managerial ability. Further, CEO tenure affects firm governance characteristics: tenure is positively associated with CEO ownership and CEO-chair duality, and negatively with board independence. However, governance characteristics do not meaningfully affect the earnings surprise-turnover relation. Results suggest that periodic performance reports increasingly resolve uncertainty about managerial ability, thereby affecting a firm’s monitoring choices, over a CEO’s tenure |
| Contact information: |
| Paolo Perego |
