Do banks really monitor? Evidence from CEO succession decisions

Research output: Contribution to journalArticle

7 Citations (Scopus)

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.
LanguageEnglish
Pages118-131
Number of pages14
JournalJournal of Banking and Finance
Volume46
Early online date29 May 2014
DOIs
Publication statusPublished - 30 Sep 2014

Fingerprint

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

Keywords

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

Cite this

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title = "Do banks really monitor? Evidence from CEO succession decisions",
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.",
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Do banks really monitor? Evidence from CEO succession decisions. / Marshall, Andrew; McCann, Laura; McColgan, Patrick.

In: Journal of Banking and Finance, Vol. 46, 30.09.2014, p. 118-131.

Research output: Contribution to journalArticle

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