Big Data

CEO Turnover In A Competitive Assignment Framework

Download Now Date Added: Apr 2010
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There is considerable and widespread concern about whether CEOs are appropriately punished for poor performance. The empirical literature on CEO turnover documents that CEOs are indeed more likely to be forced out if their performance is poor relative to the industry average. However, CEOs are also more likely to be replaced if the industry is doing badly. The authors show that these empirical patterns are natural and efficient outcomes of a competitive assignment model in which CEOs and firms form matches based on multiple characteristics, and where industry conditions affect the outside options of both managers and firms.