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.

Conference

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

Fingerprint

CEO succession
Bank debt
CEO turnover
Monitoring
Bondholders
Relationship banking
Cash flow
Bank monitoring
Stock price reaction

Keywords

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

Cite this

Marshall, A., McColgan, P., & McCann, L. (2012). Do banks really monitor? evidence from CEO succession decisions. Paper presented at Financial Engineering and Banking Society, London, United Kingdom.
Marshall, Andrew ; McColgan, Patrick ; McCann, Laura. / Do banks really monitor? evidence from CEO succession decisions. Paper presented at Financial Engineering and Banking Society, London, United Kingdom.
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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.",
keywords = "bank debt, external succession, lender monitoring, CEO succession",
author = "Andrew Marshall and Patrick McColgan and Laura McCann",
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note = "Financial Engineering and Banking Society ; Conference date: 07-06-2012 Through 08-06-2012",

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Marshall, A, McColgan, P & McCann, L 2012, 'Do banks really monitor? evidence from CEO succession decisions' Paper presented at Financial Engineering and Banking Society, London, United Kingdom, 7/06/12 - 8/06/12, .

Do banks really monitor? evidence from CEO succession decisions. / Marshall, Andrew; McColgan, Patrick; McCann, Laura.

2012. Paper presented at Financial Engineering and Banking Society, London, United Kingdom.

Research output: Contribution to conferencePaper

TY - CONF

T1 - Do banks really monitor? evidence from CEO succession decisions

AU - Marshall, Andrew

AU - McColgan, Patrick

AU - McCann, Laura

PY - 2012

Y1 - 2012

N2 - 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.

AB - 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.

KW - bank debt

KW - external succession

KW - lender monitoring

KW - CEO succession

M3 - Paper

ER -

Marshall A, McColgan P, McCann L. Do banks really monitor? evidence from CEO succession decisions. 2012. Paper presented at Financial Engineering and Banking Society, London, United Kingdom.