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CEO Turnover after Poor Performance: Turnaround or Scapegoating?

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CEO Turnover after Poor Performance: Turnaround or Scapegoating?

Rodriguez Milanes, C.M. (2015) CEO Turnover after Poor Performance: Turnaround or Scapegoating? Masters thesis, Concordia University.

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Abstract

This paper explores whether firms that dismiss their Chief Executive Officers (CEOs), due to poor corporate performance, exhibit better performance after the CEO turnover, or whether the CEO dismissal merely serves a scapegoating function. We examine whether companies that were in the eye of the public due to disappointing results recover after dismissing their CEO. We match firms in the same industry, by size, and Altman Z-Score and compare our turnover sample with this matched group of firms that did not dismiss the CEO. Our results suggest that CEO turnovers do not translate into better operating performance, or firm valuation (Tobin’s Q). However, we do find that, after some delay, the market reacts positively to CEO dismissals due to bad performance: Underperforming firms that fire their CEOs exhibit positive and significant abnormal returns, while their counterparts, who retain their CEOs, exhibit negative abnormal returns.

Key words: CEO Turnover, Scapegoating, Performance

Divisions:Concordia University > John Molson School of Business > Finance
Item Type:Thesis (Masters)
Authors:Rodriguez Milanes, C.M.
Institution:Concordia University
Degree Name:M. Sc.
Program:Administration (Finance option)
Date:February 2015
Thesis Supervisor(s):Ullah, Saif and Walker, Thomas
Keywords:CEO Turnover, Scapegoating, Performance
ID Code:979823
Deposited By: CATHERINE RODRIGUEZ
Deposited On:13 Jul 2015 18:34
Last Modified:18 Jan 2018 17:50

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