CEO turnover in a competitive assignment framework

Andrea Eisfeldt and Camelia Kuhnen

MPRA Paper from University Library of Munich, Germany

Abstract: There is considerable and widespread concern about whether CEOs are appropriately punished for poor performance. The empirical literature on CEO turnover documents that CEOs are indeed more likely to be forced out if their performance is poor relative to the industry average. However, CEOs are also more likely to be replaced if the industry is doing badly. We show that these empirical patterns are natural and efficient outcomes of a competitive assignment model in which CEOs and firms form matches based on multiple characteristics, and where industry conditions affect the outside options of both managers and firms. Our model also has several new predictions about the type of replacement manager, and their pay and performance. We construct a dataset which describes all turnover events during the period 1992-2006 and show that these predictions are also born out empirically.

Keywords: Executive Turnover; Matching Models; Competitive Assignment; CEO Labor Market (search for similar items in EconPapers)
JEL-codes: G30 J31 J41 J44 J63 M51 (search for similar items in EconPapers)
Date: 2010-04-23
New Economics Papers: this item is included in nep-bec, nep-cse and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: CEO turnover in a competitive assignment framework (2013)
Working Paper: CEO Turnover in a Competitive Assignment Framework (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:22367

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