Research article of Global journal of Economics and Business Administration
CEO Turnover and IPO Performance
Guanyu Chen1 and Hengfeng Xu2*
1Hangzhou Hump Supply Chain Limited
2Lancaster University Management School
Previous research presents extensive conclusive results regarding the association between firm performance and CEO turnover. However, the issue of CEO turnover is still rarely investigated with regard to the usefulness Initial Public Offerings (IPOs) performance in the topic of Chief Executives Officers (CEOs) turnovers. The principle objective of this study is to investigate whether the likelihood of the CEOs turnover is inversely correlated with the IPO performance of the firm. This study is conducted by employing the U.S. sample data consists of 462 firms including 173 CEO turnover events within 5 years after the IPO offering during the period between 2003 and 2013, and it is mainly concluded that CEO turnover matters with respect to firm IPO performance, however, only for IPO long-term performance, rather than short-term performance.
Keywords: CEO Turnover, IPO Performance
How to cite this article:
Guanyu Chen and Hengfeng Xu. CEO Turnover and IPO Performance. Global journal of Economics and Business Administration, 2020, 5:34. DOI:10.28933/gjeba-2020-09-0406
1. Adams, John C., and Sattar A. Mansi, 2009, CEO turnover and bondholder wealth, Journal of Banking & Finance 33, 522-533.
2. Adams, Renée, Heitor Almeida, and Daniel Fer-reira, 2009, Understanding the relationship be-tween founder–ceos and firm performance, Journal of Empirical Finance 16, 136-150.
3. Álvarez, Susana, and Víctor M. González, 2005, Signalling and the long-run performance of span-ish initial public offerings (ipos), Journal of Busi-ness Finance & Accounting 32, 325-350.
4. Anderson, Ronald C, and David M Reeb, 2003, Founding-family ownership and firm perfor-mance: Evidence from the s&p 500, Journal of Finance 1301-1328.
5. Barber, Brad M, and John D Lyon, 1996, Detect-ing abnormal operating performance: The empir-ical power and specification of test statistics, Journal of Financial Economics 41, 359-399.
6. Barber, Brad M, and John D Lyon, 1997, Detect-ing long-run abnormal stock returns: The empiri-cal power and specification of test statistics, Journal of Financial Economics 43, 341-372.
7. Baron, David P, 1982, A model of the demand for investment banking advising and distribution services for new issues, The Journal of Finance 955-976.
8. Baron, David P., and Bengt Holmström, 1980, The investment banking contract for new issues under asymmetric information: Delegation and the incentive problem, The Journal of Finance 35, 1115-1138.
9. Barro, Jason R, and Robert J Barro, 1990, Pay, performance, and turnover of bank CEOs, (Na-tional Bureau of Economic Research).
10. Beatty, Randolph P, and Jay R Ritter, 1986, In-vestment banking, reputation, and the underpric-ing of initial public offerings, Journal of Financial Economics 15, 213-232.
11. Beatty, Randolph P, and Edward J Zajac, 1987, Ceo change and firm performance in large cor-porations: Succession effects and manager ef-fects, Strategic Management Journal 8, 305-317.
12. Beatty, Randolph P, and Edward J Zajac, 1990, Top management incentives, monitoring, and risk-bearing: A study of executive compensation, ownership, and board structure in initial public offerings, Academy of Management Proceed-ings (Academy of Management).
13. Benston, George J, 1985, The self-serving man-agement hypothesis: Some evidence, Journal of Accounting and Economics 7, 67-84.
14. Bertrand, Marianne, and Antoinette Schoar, 2003, Managing with style: The effect of managers on firm policies, The Quarterly Journal of Economics 118, 1169-1208.
15. Bhagat, Sanjai, and Brian Bolton, 2008, Corpo-rate governance and firm performance, Journal of Corporate Finance 14, 257-273.
16. Bhagat, Sanjai, Brian J Bolton, and Ajay Subra-manian, 2010, Ceo education, ceo turnover, and firm performance, Available at SSRN 1670219.
17. Boeker, Warren, 1992, Power and managerial dismissal: Scapegoating at the top, Administra-tive Science Quarterly 400-421.
18. Borokhovich, Kenneth A, Robert Parrino, and Te-resa Trapani, 1996, Outside directors and ceo selection, Journal of Financial and Quantitative Analysis 31, 337-355.
19. Brau, James C, Robert B Couch, and Ninon K Sutton, 2012, The desire to acquire and ipo long-run underperformance, Journal of Financial and Quantitative Analysis 47, 493-510.
20. Brickley, James A., 2003, Empirical research on ceo turnover and firm-performance: A discussion, Journal of Accounting and Economics 36, 227-233.
21. Chaney, Paul K., and Craig M. Lewis, 1998, In-come smoothing and underperformance in initial public offerings, Journal of Corporate Finance 4, 1-29.
22. Chang, Eric C., and Sonia M. L. Wong, 2009, Governance with multiple objectives: Evidence from top executive turnover in china, Journal of Corporate Finance 15, 230-244.
23. Coles, Jeffrey L, Naveen D Daniel, and Lalitha Naveen, 2008, Boards: Does one size fit all?, Journal of Financial Economics 87, 329-356.
24. Cosh, Andy, and Alan Hughes, 1997, Executive remuneration, executive dismissal and institu-tional shareholdings, International Journal of In-dustrial Organization 15, 469-492.
25. Coughlan, Anne T, and Ronald M Schmidt, 1985, Executive compensation, management turnover, and firm performance: An empirical investigation, Journal of Accounting and Economics 7, 43-66.
26. Coughlan, Anne T., and Ronald M. Schmidt, 1985, Executive compensation, management turnover, and firm performance: An empirical in-vestigation, Journal of Accounting and Econom-ics 7, 43-66.
27. Daily, Catherine M, S Trevis Certo, Dan R Dalton, and Rungpen Roengpitya, 2003, Ipo underpricing: A meta‐analysis and research synthesis, Entre-preneurship Theory and Practice 27, 271-295.
28. Daily, Catherine M, Patricia P McDougall, Jeffrey G Covin, and Dan R Dalton, 2002, Governance and strategic leadership in entrepreneurial firms, Journal of Management 28, 387-412.
29. Daniel, Kent, David Hirshleifer, and Avanidhar Subrahmanyam, 1998, Investor psychology and security market under‐and overreactions, The Journal of Finance 53, 1839-1885.
30. DeFond, Mark L, and Chul W Park, 1999, The ef-fect of competition on CEO turnover, Journal of Accounting and Economics 27, 35-56.
31. Denis, David J, Diane K Denis, and Atulya Sarin, 1997, Ownership structure and top executive turnover, Journal of Financial Economics 45, 193-221.
32. Denis, David J, and Timothy A Kruse, 2000, Managerial discipline and corporate restructuring following performance declines, Journal of Fi-nancial Economics 55, 391-424.
33. Denis, David J., and Diane K. Denis, 1995, Per-formance changes following top management dismissals, The Journal of Finance 50, 1029-1057.
34. Depperu, Donatella, Enrico Fabrizi, and Daniele M Ghezzi, 2013, Ipo and ceo turnover. A study on italian companies listed, BANCARIA 9, 24-35.
35. Dikolli, ShaneS, WilliamJ Mayew, and Dhananjay Nanda, 2014, CEO tenure and the performance-turnover relation, Review of Accounting Studies 19, 281-327.
36. Engel, Ellen, Rachel M Hayes, and Xue Wang, 2003, Ceo turnover and properties of accounting information, Journal of Accounting and Econom-ics 36, 197-226.
37. Faleye, Olubunmi, 2007, Classified boards, firm value, and managerial entrenchment, Journal of Financial Economics 83, 501-529.
38. Fama, Eugene F, 1998, Market efficiency, long-term returns, and behavioral finance, Journal of Financial Economics 49, 283-306.
39. Farrell, Kathleen A., and David A. Whidbee, 2002, Monitoring by the financial press and forced ceo turnover, Journal of Banking & Finance 26, 2249-2276.
40. Fee, C Edward, and Charles J Hadlock, 2004, Management turnover across the corporate hier-archy, Journal of Accounting and Economics 37, 3-38.
41. Finkelstein, Sydney, 1992, Power in top man-agement teams: Dimensions, measurement, and validation, The Academy of Management Journal 35, 505-538.
42. Firth, Michael, Peter MY Fung, and Oliver M Rui, 2006, Corporate performance and ceo compen-sation in china, Journal of Corporate Finance 12, 693-714.
43. Fisman, Raymond J, Rakesh Khurana, Matthew Rhodes-Kropf, and Soojin Yim, 2013, Govern-ance and ceo turnover: Do something or do the right thing?, Management Science 60, 319-337.
44. Francoeur, Claude, Réal Labelle, and Bernard Sinclair-Desgagne, 2008, Gender diversity in corporate governance and top management, Journal of Business Ehics 81, 83-95.
45. Furtado, Eugene P. H., and Vijay Karan, 1990, Causes, consequences, and shareholder wealth effects of management turnover: A review of the empirical evidence, Financial Management 19, 60-75.
46. Furtado, Eugene PH, and Michael S Rozeff, 1987, The wealth effects of company initiated management changes, Journal of Financial Eco-nomics 18, 147-160.
47. Gao, Ning, and Bharat A. Jain, 2011, Founder ceo management and the long-run investment performance of ipo firms, Journal of Banking & Finance 35, 1669-1682.
48. Gibbons, Robert, and Kevin J Murphy, 1990, Relative performance evaluation for chief execu-tive officers, Industrial & Labor Relations Review 43, 30S-51S.
49. Gompers, Paul A, and Josh Lerner, 2003, The really long‐run performance of initial public offer-ings: The pre‐nasdaq evidence, The Journal of Finance 58, 1355-1392.
50. Gounopoulos, Dimitrios, Christos Panagiotis Nounis, and Paris Stylianides, 2007, The short and long term performance of initial public offer-ings in the cyprus stock exchange, Journal of Fi-nancial Decision Making 4.
51. Goyal, Vidhan K, and Chul W Park, 2002, Board leadership structure and ceo turnover, Journal of Corporate Finance 8, 49-66.
52. Grusky, Oscar, 1963, Managerial succession and organizational effectiveness, American Journal of Sociology 21-31.
53. Harrison, J Richard, David L Torres, and Sal Kukalis, 1988, The changing of the guard: Turno-ver and structural change in the top-management positions, Administrative Science Quarterly 211-232.
54. Harrison, J. Richard, David L. Torres, and Sal Kukalis, 1988, The changing of the guard: Turno-ver and structural change in the top-management positions, Administrative Science Quarterly 33, 211-232.
55. Helmich, Donald L, 1974, Organizational growth and succession patterns, Academy of Manage-ment Journal 17, 771-775.
56. Hermalin, Benjamin E, and Michael S Weisbach, 1988, The determinants of board composition, The RAND Journal of Economics 589-606.
57. Hill, Aaron D, Arun D Upadhyay, and Rafik I Beekun, 2014, Do female and ethnically diverse executives endure inequity in the ceo position or do they benefit from their minority status? An empirical examination, Strategic Management Journal.
58. Holmstrom, Bengt, 1992, Contracts and the mar-ket for executives: Comment, Contract econom-ics 212-217.
59. Hölmstrom, Bengt, 1979, Moral hazard and ob-servability, The Bell Journal of Economics 10, 74-91.
60. Horner, Stephen V, 2010, Board power, CEO appointments and CEO duality, Academy of Strategic Management Journal 9, 43.
61. Hosmer Jr, David W, and Stanley Lemeshow, 2004. Applied logistic regression (John Wiley & Sons).
62. Huson, Mark R, Robert Parrino, and Laura T Starks, 2001, Internal monitoring mechanisms and ceo turnover: A long‐term perspective, The Journal of Finance 56, 2265-2297.
63. Huson, Mark R., Paul H. Malatesta, and Robert Parrino, 2004, Managerial succession and firm performance, Journal of Financial Economics 74, 237-275.
64. Ibbotson, Roger G, 1975, Price performance of common stock new issues, Journal of Financial Economics 2, 235-272.
65. Jensen, Michael C, and Kevin J Murphy, 1990, Performance pay and top-management incen-tives, Journal of Political Economy 225-264.
66. Jenter, Dirk, and Fadi Kanaan, 2015, Ceo turno-ver and relative performance evaluation, The Journal of Finance.
67. Kang, Jun-Koo, and Anil Shivdasani, 1995, Firm performance, corporate governance, and top executive turnover in japan, Journal of Financial Economics 38, 29-58.
68. Kang, Jun-Koo, and Anil Shivdasani, 1996, Does the japanese governance system enhance share-holder wealth? Evidence from the stock-price ef-fects of top management turnover, The Review of Financial Studies 9, 1061-1095.
69. Kato, Takao, and Cheryl Long, 2006, Executive turnover and firm performance in china, The American Economic Review 363-367.
70. Leone, Andrew J, and Michelle Liu, 2010, Ac-counting irregularities and executive turnover in founder-managed firms, The Accounting Review 85, 287-314.
71. Lewis, Jane, 1992, Gender and the development of welfare regimes, Journal of European Social Policy 2, 159-173.
72. Ljungqvist, Alexander, 2007, Ipo underpricing: A survey, handbook in corporate finance: Empiri-cal corporate finance, Espen Eckbo, ed.
73. Loughran, Tim, and Jay R. Ritter, 1995, The new issues puzzle, The Journal of Finance 50, 23-51.
74. Lowry, Michelle, Micah S. Officer, and G. William Schwert, 2010, The variability of ipo initial returns, The Journal of Finance 65, 425-465.
75. Lyness, Karen S, and Michael K Judiesch, 2001, Are female managers quitters? The relationships of gender, promotions, and family leaves of ab-sence to voluntary turnover, Journal of Applied Psychology 86, 1167.
76. Lyon, John D, Brad M Barber, and Chih‐Ling Tsai, 1999, Improved methods for tests of long‐run abnormal stock returns, The Journal of Finance 54, 165-201.
77. Mikkelson, Wayne H., and M. Megan Partch, 1997, The decline of takeovers and disciplinary managerial turnover, Journal of Financial Eco-nomics 44, 205-228.
78. Miller, Edward M., 1977, Risk, uncertainty, and divergence of opinion, The Journal of Finance 32, 1151-1168.
79. Mirrlees, James A., 1976, The optimal structure of incentives and authority within an organization, The Bell Journal of Economics 7, 105-131.
80. Mitchell, Mark L, and Erik Stafford, 2000, Mana-gerial decisions and long-term stock price per-formance*, The Journal of Business 73, 287-329.
81. Mitsuhashi, Hitoshi, and Theresa M Welbourne, 1999, Chief executive officer (ceo) tenure in ini-tial public offering (ipo) firms: An event history analysis of the determinants of turnover.
82. Morck, Randall, Andrei Shleifer, and Robert W. Vishny, 1989, Alternative mechanisms for corpo-rate control, The American Economic Review 79, 842-852.
83. Murphy, Kevin J, and Jerold L Zimmerman, 1993, Financial performance surrounding ceo turnover, Journal of Accounting and Economics 16, 273-315.
84. Offenberg, David, 2009, Firm size and the effec-tiveness of the market for corporate control, Journal of Corporate Finance 15, 66-79.
85. Osborn, Richard N., Lawrence R. Jauch, Thomas N. Martin, and William F. Glueck, 1981, The event of ceo succession, performance, and environ-mental conditions, The Academy of Management Journal 24, 183-191.
86. Pagano, Marco, Fabio Panetta, Zingales, and Luigi, 1998, Why do companies go public? An empirical analysis, The Journal of Finance 53, 27-64.
87. Pfeffer, Jeffrey, and William L Moore, 1980, Av-erage tenure of academic department heads: The effects of paradigm, size, and departmental de-mography, Administrative Science Quarterly 387-406.
88. Puffer, Sheila M, and Joseph B Weintrop, 1991, Corporate performance and ceo turnover: The role of performance expectations, Administrative Science Quarterly 1-19.
89. Rasbeed, AMA, Deepak K Datta, and Ravi R Chinta, 1997, Determinants of price premiums: A study of initial public offerings in the medical di-agnostics and devices industry, Journal of Small Business Management 35, 11-23.
90. Reilly, Frank K, and Kenneth Hatfield, 1969, In-vestor experience with new stock issues, Finan-cial Analysts Journal 25, 73-80.
91. Ritter, Jay R, 1991, The long‐run performance of initial public offerings, The Iournal of Finance 46, 3-27.
92. Ritter, Jay R., 1984, The “hot issue” market of 1980, The Journal of Business 57, 215-240.
93. Ritter, Jay R., and Ivo Welch, 2002, A review of ipo activity, pricing, and allocations, The Journal of Finance 57, 1795-1828.
94. Rock, Kevin, 1986, Why new issues are under-priced, Journal of financial economics 15, 187-212.
95. Rose, Caspar, 2007, Does female board repre-sentation influence firm performance? The dan-ish evidence, Corporate Governance: An Interna-tional Review 15, 404-413.
96. Rosen, Sherwin, 1990, Contracts and the market for executives, (National Bureau of Economic Research).
97. Salancik, Gerald R, and James R Meindl, 1984, Corporate attributions as strategic illusions of management control, Administrative science quarterly 238-254.
98. Salancik, Gerald R, and Jeffrey Pfeffer, 1980, Effects of ownership and performance on exec-utive tenure in us corporations, Academy of Management journal 23, 653-664.
99. Schubert, Renate, Martin Brown, Matthias Gysler, and Hans Wolfgang Brachinger, 1999, Financial decision-making: Are women really more risk-averse?, American Economic Review 381-385.
100. Shavell, Steven, 1979, Risk sharing and incentives in the principal and agent relationship, The Bell Journal of Economics 10, 55-73.
101. Shen, Wei, 2000, Political dynamics with-in corporate upper echelons and their impacts on contender and outsider ceo successon, Acade-my of Management Proceedings BPS: H1.
102. Smith, Frank, Alan Wright, and Y Paul Huo, 2008, Scapegoating only works if the herd is big: Downsizing, management turnover, and company turnaround, Journal of International Business Strategy 8.
103. Stelter, Nicole Z, 2002, Gender differ-ences in leadership: Current social issues and fu-ture organizational implications, Journal of Lead-ership & Organizational Studies 8, 88-99.
104. Stroh, Linda K, Jeanne M Brett, and Anne H Reilly, 1996, Family structure, glass ceil-ing, and traditional explanations for the differen-tial rate of turnover of female and male manag-ers, Journal of Vocational Behavior 49, 99-118.
105. Taylor, Lucian A, 2010, Why are ceos rarely fired? Evidence from structural estimation, The Journal of Finance 65, 2051-2087.
106. Teoh, Siew Hong, Ivo Welch, and Tak Jun Wong, 1998, Earnings management and the long‐run market performance of initial public of-ferings, The Journal of Finance 53, 1935-1974.
107. Villalonga, Belen, and Raphael Amit, 2006, How do family ownership, control and management affect firm value?, Journal of Fi-nancial Economics 80, 385-417.
108. Virany, Beverly, Michael L Tushman, and Elaine Romanelli, 1985, A longitudinal study of the determinants and effects of executive suc-cession, Academy of Management Proceedings (Academy of Management).
109. Warner, Jerold B., Ross L. Watts, and Karen H. Wruck, 1988, Stock prices and top management changes, Journal of Financial Eco-nomics 20, 461-492.
110. Wasserman, Noam, 2003, Founder-ceo succession and the paradox of entrepreneurial success, Organization Science 14, 149-172.
111. Weisbach, Michael S., 1988, Outside di-rectors and ceo turnover, Journal of Financial Economics 20, 431-460.
112. Welbourne, Theresa M, and Linda A Cyr, 1999, The human resource executive effect in ini-tial public offering firms, Academy of Manage-ment Journal 42, 616-629.
This work and its PDF file(s) are licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.