Powerful blockholders and CEO turnover

Powerful blockholders and CEO turnover

We identify the power of institutional blockholders to influence management using previous occurrences of forced CEO turnover at other firms in the blockholders’ overall portfolio. We create a “powerful blockholder linkage” measure that strongly predicts future forced CEO turnover. These effects are...

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Bibliographic Details
Main Authors: WEI, Chi Shen, ZHANG, Lei
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2017
Subjects:
Institutional Blockholders
CEO Turnover
Corporate Governance
Corporate Finance
Finance and Financial Management
Online Access:https://ink.library.smu.edu.sg/lkcsb_research/5416
https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=6415&context=lkcsb_research
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Institution: Singapore Management University
Language: English
Description
Summary:We identify the power of institutional blockholders to influence management using previous occurrences of forced CEO turnover at other firms in the blockholders’ overall portfolio. We create a “powerful blockholder linkage” measure that strongly predicts future forced CEO turnover. These effects are larger when “powerful” blockholders are more motivated to monitor and when they have had valuable monitoring experience. Moreover, firms with powerful blockholders display higher CEO turnover-performance sensitivity, pursue more value-increasing mergers, and have higher firm value. Overall, our results suggest that an identifiable group of powerful blockholders play an important role in corporate governance.

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