Equity issuance, CEO turnover and corporate governance

Research output: Contribution to journalArticle

20 Citations (Scopus)

Abstract

There is substantial evidence on the effect of external market discipline on chief executive turnover decisions in poorly performing companies. In this study we present evidence on the role of institutional monitoring in these decisions through the equity issuance process. We find that firms which undertake equity offerings are associated with an increased rate of forced CEO turnover that is focused on the managers of poorly performing companies. At the same time, equity offerings increase the likelihood of a new CEO being appointed from outside the current management team. We also provide evidence that independent boards are more likely to forcibly remove CEOs from their position, although this is not conditional on poor performance.
LanguageEnglish
Pages515-538
Number of pages23
JournalEuropean Financial Management
Volume11
Issue number4
Publication statusPublished - 2005

Fingerprint

Corporate governance
Equity issuance
CEO turnover
Chief executive officer
Equity offerings
Chief executives
Managers
Team management
Executive turnover
Market discipline
Monitoring

Keywords

  • CEO turnover
  • equity issuance
  • board structure

Cite this

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Equity issuance, CEO turnover and corporate governance. / McColgan, P.; Hillier, D.J.; Linn, S.C.

In: European Financial Management, Vol. 11, No. 4, 2005, p. 515-538.

Research output: Contribution to journalArticle

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AB - There is substantial evidence on the effect of external market discipline on chief executive turnover decisions in poorly performing companies. In this study we present evidence on the role of institutional monitoring in these decisions through the equity issuance process. We find that firms which undertake equity offerings are associated with an increased rate of forced CEO turnover that is focused on the managers of poorly performing companies. At the same time, equity offerings increase the likelihood of a new CEO being appointed from outside the current management team. We also provide evidence that independent boards are more likely to forcibly remove CEOs from their position, although this is not conditional on poor performance.

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KW - equity issuance

KW - board structure

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T2 - European Financial Management

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