- IRP5

Huang, Sheng

Associate Professor

Associate Professor of Finance

Email：shenghuang@ceibs.edu

Dr. Huang received his Ph.D. in Economics from Washington University in St. Louis, M.Phil. in Economics from University of Cambridge, and B.A. in History and Economics from Peking University. His current research focuses primarily on Corporate Finance, Merger and Acquisition, Integration of Industry and Finance, Executive Compensation, Corporate Governance, Financial Intermediation, and Investment. His articles have been published in leading academic journals such as Management Science, Journal of Financial Intermediation, and Review of Financial Studies, among others. Dr. Huang is an ad hoc referee for top journals including Journal of Finance, Review of Financial Studies, Management Science, and Journal of Corporate Finance and for Research Grant Council of Hong Kong and The Netherlands Organization for Scientific Research (NWO). He is also a member of American Finance Association, Western Finance Association, European Finance Association, and Financial Intermediation Research Society.

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Disagreement-induced CEO turnover

Huang, Sheng ; Maharjan, Johan ; Thakor, Anjan V.
Journal of Financial Intermediation , 2019 (Forthcoming) , 1
Scopus ABDC-A*

Abstract

We propose and test a new explanation for forced CEO turnover, and examine its implications for the impact of firm performance on CEO turnover. Investors may disagree with management on optimal decisions due to heterogeneous prior beliefs. Theory suggests that such disagreement may be persistent and costly to firms; we document that this induces them to sometimes replace CEOs who investors disagree with, controlling for firm performance. A lower level of CEO-investor disagreement serves to partially “protect” CEOs from being fired, thus reducing turnover-performance sensitivity, which we also document. We also show that firms are more likely to hire an external CEO as a successor if disagreement with the departing CEO is higher. Disagreement declines following forced CEO turnover. Using various empirical strategies, we rule out other confounding interpretations of our findings. We conclude that disagreement, independently of firm performance, affects forced CEO turnover.

Keyword

CEO turnover ; Corporate governance ; Heterogeneous beliefs ; Investor-management disagreement

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