Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • February 2014
  • Article
  • Management Science

Governance and CEO Turnover: Do Something or Do the Right Thing?

By: Ray Fisman, Rakesh Khurana, Matthew Rhodes-Kropf and Soojin Yim
  • Format:Print
ShareBar

Abstract

We study how corporate governance affects firm value through the decision of whether to fire or retain the CEO. We present a model in which weak governance—which prevents shareholders from controlling the board—protects inferior CEOs from dismissal, while at the same time insulates the board from pressures by biased or uninformed shareholders. Whether stronger governance improves retain/replace decisions depends on which of these effects dominates. We use our theoretical framework to assess the effect of governance on the quality of firing and hiring decisions using data on the CEO dismissals of large U.S. corporations during 1994–2007. Our findings are most consistent with a beneficent effect of weak governance on CEO dismissal decisions, suggesting that insulation from shareholder pressure may allow for better long-term decision making.

Keywords

Governing and Advisory Boards; Value; Retention; Resignation and Termination; Corporate Governance; Management Teams; Business and Shareholder Relations

Citation

Fisman, Ray, Rakesh Khurana, Matthew Rhodes-Kropf, and Soojin Yim. "Governance and CEO Turnover: Do Something or Do the Right Thing?" Management Science 60, no. 2 (February 2014): 319–337.
  • Find it at Harvard
  • Read Now

About The Author

Rakesh Khurana

Organizational Behavior
→More Publications

More from the Authors

    • June 2018
    • Journal of Financial Economics

    Cost of Experimentation and the Evolution of Venture Capital

    By: Michael Ewens, Ramana Nanda and Matthew Rhodes-Kropf
    • February 2018
    • Faculty Research

    Still Leading Series—Issues in Transitioning to New Forms of Service Later in Life

    By: Rosabeth Moss Kanter, Rakesh Khurana, James Honan and Ai-Ling Jamila Malone
    • June 2017
    • History of Political Economy

    The Social Trajectory of a Finance Professor and the Common Sense of Capital

    By: Marion Fourcade and Rakesh Khurana
More from the Authors
  • Cost of Experimentation and the Evolution of Venture Capital By: Michael Ewens, Ramana Nanda and Matthew Rhodes-Kropf
  • Still Leading Series—Issues in Transitioning to New Forms of Service Later in Life By: Rosabeth Moss Kanter, Rakesh Khurana, James Honan and Ai-Ling Jamila Malone
  • The Social Trajectory of a Finance Professor and the Common Sense of Capital By: Marion Fourcade and Rakesh Khurana
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Accessibility
  • Digital Accessibility
Copyright © President & Fellows of Harvard College