The influence of CEO departure and board characteristics on firm performance

Abstract

This paper uses panel data from 271 U.S. firms to empirically examine the relationship between the departure of a firm’s CEO and that firm’s performance. Results of our analysis reveal a significant relationship between CEO departure and firm performance. Specifically, we found that the departure of entrenched CEOs negatively affects current and future firm performance. Results also demonstrate that board size and the presence of independent administrators moderates the relationship between CEO departure and firm performance. This suggests that entrenched CEOs can have informal associations with independent administrators.