CEO Turnover and Director Reputation

AuthorM. Schmid, F. von Meyerinck, J. Romer
JournalJournal of Financial Economics
Date16 Dec. 2024
CategoryAcademic Publications
Volume163
Page numbers103971

This paper analyzes the reputational effects of forced CEO turnovers on outside directors. We find that directors interlocked to a forced CEO turnover experience large and persistent increases in withheld votes at subsequent re-elections relative to non-turnover-interlocked directors. Directors are not penalized for an involvement in a turnover per se but for forced CEO turnovers that are related to governance failures by the board. Our results challenge the widespread view that forcing out a CEO can generally be understood as a sign of a well-functioning corporate governance.