CEO turnover and bondholder wealth |
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| Authors: | John C Adams Sattar A Mansi |
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| Institution: | 1. Department of Accounting and Finance, Coggin College of Business, University of North Florida, Jacksonville, FL 32224, United States;2. Department of Finance and Management Science, A. Gary Anderson Graduate School of Management, University of California – Riverside, Riverside, CA 92521, United States;3. Department of Finance, Insurance and Law, Pamplin College of Business, Virginia Tech, Blacksburg, VA 24061, United States |
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| Abstract: | We examine the impact of CEO turnover announcements on bondholder wealth, stockholder wealth, and overall firm value. Using publicly traded data for the period from 1973 to 2000, we find evidence consistent with both the wealth transfer and signaling hypotheses. Specifically, we find that CEO turnover events are associated with lower bondholder values, higher stockholder values, and that net changes in firm value are a function of turnover type (forced vs voluntary and outside vs inside firm replacements) and the riskiness of the firm’s debt (investment vs non-investment grade). Overall, the results contribute to the understanding of the effects of corporate governance mechanisms, of which CEO turnover is an extreme form, on bondholders. |
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| Keywords: | G14 G34 |
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