Spillover effects of CEO performance-induced removal on competitor CEOs' firms' financial policies
ISSN: 1526-5943
Article publication date: 7 July 2023
Issue publication date: 8 November 2023
Abstract
Purpose
The authors examine the spillover effects of CEO removal on the corporate financial policies of competing firms among S&P 1500 firms.
Design/methodology/approach
The authors used generalized estimating equations (GEE) on a sample of S&P 1,500 firms from 2000 to 2018 to test this study's research hypotheses. Return on assets (ROA), investment policy, and payout policy are used as proxies for corporate policies.
Findings
The authors found an increase in ROA and dividend payout in the immediate aftermath. Further, this study's hypothesis does not hold for R&D expenditure and net-working capital as the authors found an insignificant change in them in the immediate aftermath. However, the authors found a significant reduction in capital expenditure, supporting this study's hypothesis in the context of investment policy. Institutional investors and product similarity moderated the spillover effect on corporate policies (ROA, dividend payout, and capital expenditure).
Originality/value
The authors address a novel aspect of CEO performance-induced removal due to poor performance, i.e., the response of other CEOs to CEO performance-induced removal. This study's findings add to the literature supporting the bright side of CEOs' response to CEO performance-induced removal in peer firms due to poor performance.
Keywords
Citation
Saif-Ur-Rehman, Hussainey, K. and Khan, H. (2023), "Spillover effects of CEO performance-induced removal on competitor CEOs' firms' financial policies", Journal of Risk Finance, Vol. 24 No. 5, pp. 554-584. https://doi.org/10.1108/JRF-01-2023-0016
Publisher
:Emerald Publishing Limited
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