Voting with their feet: institutional ownership changes around forced CEO turnover |
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| Institution: | 1. College of Business & Entrepreneurship, The University of Texas Rio Grande Valley, Edinburg, TX 78539, USA;2. Haub School of Business, Saint Joseph''s University, Philadelphia, PA 19131, USA;3. School of Business, State University of New York at Oswego, Oswego, NY 13126, USA;4. Craig School of Business, Missouri Western State University, St Joseph, MO 64507, USA;1. University of California, Davis Graduate School of Management, United States;2. University of South Carolina, Darla Moore School of Business, United States;3. Virginia Tech, Pamplin College of Business, United States |
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| Abstract: | We investigate whether institutional investors “vote with their feet” when dissatisfied with a firm's management by examining changes in equity ownership around forced CEO turnover. We find that aggregate institutional ownership and the number of institutional investors decline in the year prior to forced CEO turnover. However, selling by institutions is far from universal. Overall, there is an increase in shareholdings of individual investors and a decrease in holdings of institutional investors who are more concerned with holding prudent securities, are better informed, or are engaged in momentum trading. Measures of institutional ownership changes are negatively related to the likelihoods of forced CEO turnover and that an executive from outside the firm is appointed CEO. |
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