Narrow Results

Using data from 2,744 listed non-financial firms located in 273 Chinese cities and municipalities during the period spanning 2003 to 2017, this paper examines the impact of changes in urban liveability on the voluntary turnover of CEOs. Employing the panel probit methodology, we find that enhancements in urban liveability result in a reduction in CEO turnover. Moreover, such enhancements also serve to partially mitigate the performance sensitivity of CEO turnover. In a disaggregated analysis, we find that improvements in urban liveability likewise decrease the likelihood of CEO turnover for foreign-owned firms, companies facing stronger external rivals, and those lacking government industrial policy support. Our work extends existing literature on the factors influencing CEO turnover within the framework of incomplete contract theory. Additionally, this paper offers a policy foundation for urban planners to effectively decrease the CEO turnover rate by enhancing urban liveability.

This study examines the application of CEO turnover on reverse stock splits firms. Using Taiwanese samples, we find that non-CEO turnover firms receive negative long-term abnormal returns, and their financial performances continue to decline following reverse splits. These findings are consistent with prior studies. Contrarily, neither significantly negative long-term abnormal returns nor changes on financial performance were found for CEO turnover firms. This study concludes that applying CEO turnover is suggestive in reverse splits. Additionally, we find that reverse split firms raise debt and concern with their short-term solvency following splits.

Chief Executive Officer (CEO) characteristics, such as the level of risk aversion, are known to affect corporate financial policies, and therefore are likely to impact corporate liquidity decisions. We examine changes in cash holdings around CEO turnover events, a period in which discrete changes in managerial preferences and abilities are likely to have the most dramatic effect on cash holdings. Our results suggest that cash holdings increase significantly following forced departures. The increase is persistent over the successor’s tenure and is robust to controls for the standard firm-level determinants of cash holdings and corporate governance characteristics. We find that higher cash holdings arise mainly through the management of net working capital, as opposed to asset sales or reductions in investment. This suggests that the changes are optimal for shareholders rather than an indication of serious agency problems. This conclusion is supported further by our finding that the marginal value of cash does not decrease following the turnover.

CEO turnovers are important corporate events that can lead to significant changes within the firm. We find that CEO departures are associated with a subsequent increase in bank loan financing. The negative effect that CEO departures have on borrowing costs is largely driven by forced CEO turnovers. Following such departures, firms pay higher loan spreads, see an increase in covenants, and are more likely to be subject to collateral requirements, when compared to matched non-turnover and voluntary turnover firms. Evidence suggests that asset substitution and changes in accounting information quality help to explain the observed worsened terms following forced dismissals. On the other hand, more traditional voluntary departures are unrelated to changes in price and non-price loan terms.

We find that the presence of independent directors who are blockholders (IDBs) in firms promotes better CEO contracting and monitoring, and higher firm valuation. Using a panel of about 11,500 firm-years with a unique, hand-collected dataset on IDB-identity and a novel instrument, we find that firms with IDBs have lower excess CEO pay, lower flow and stock of CEO equity incentives, and higher valuations. These effects are substantial and robust. Our findings imply that by making it easier for blockholders to obtain a board seat, proxy access rules or bylaws can benefit shareholders.