Title: CEO turnover after poor performance: turnaround or scapegoating?

Authors: Catherine M. Rodriguez Milanes; Saif Ullah; Thomas Walker

Addresses: John Molson School of Business, Concordia University, 1450 Guy St., Montreal, Quebec, H3H 0A1, Canada ' John Molson School of Business, Concordia University, 1450 Guy St., Montreal, Quebec, H3H 0A1, Canada ' John Molson School of Business, Concordia University, 1450 Guy St., Montreal, Quebec, H3H 0A1, Canada

Abstract: This paper explores whether firms that dismiss their CEO following poor corporate performance exhibit better performance post-turnover or whether dismissal merely serves a scapegoating function. We match firms in the same industry, by size, and by Altman Z-score, and compare our turnover sample with the matched group of firms without CEO dismissal. A subset of our results suggests that, after some delay, the market reacts positively to CEO dismissals that occur following bad performance: underperforming firms that fire their CEO exhibit positive and significant abnormal returns whereas their counterparts that retain their CEO exhibit negative abnormal returns. However, the majority of our findings indicate that CEO turnovers do not translate into better operating performance or firm valuation (Tobin's q), thus lending credence to the scapegoating hypothesis.

Keywords: CEO turnover; scapegoating; performance.

DOI: 10.1504/IJAF.2018.089971

International Journal of Accounting and Finance, 2018 Vol.8 No.1, pp.1 - 37

Accepted: 17 Jul 2017
Published online: 26 Feb 2018 *

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