Do banks really monitor? evidence from CEO succession decisions

Research output: Contribution to conferencePaper

Abstract

We demonstrate that banks play an important monitoring role in CEO succession that is not observed for other types of lenders, particularly public bondholders. There is a stronger relation between cash flow performance and forced CEO turnover for firms issuing bank debt during the year of CEO turnover than for firms not issuing bank debt, and bank debt issuance increases the likelihood of external CEO succession. The stock price reaction to CEO succession is higher when bank monitoring is prevalent. Our results are consistent with theories of relationship banking that propose a valuable monitoring role for well informed, incentivized bank lenders.
Original languageEnglish
Publication statusPublished - 2012
EventFinancial Engineering and Banking Society - London, United Kingdom
Duration: 7 Jun 20128 Jun 2012

Conference

ConferenceFinancial Engineering and Banking Society
CountryUnited Kingdom
CityLondon
Period7/06/128/06/12

Keywords

  • bank debt
  • external succession
  • lender monitoring
  • CEO succession

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