CEO turnover in large banks: Does tail risk matter?

Abhishek Srivastav, Kevin Keasey, Sabur Mollah, Francesco Vallascas*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

In a cross-country setting we show the probability of a forced CEO turnover in large banks is positively associated with idiosyncratic tail risk. This finding is strengthened the greater the competition in the banking industry and when stakeholders have more to lose in the case of distress. Overall, the exposure to idiosyncratic tail risk offers valuable signals to bank boards on the quality of the choices made by CEOs. In contrast, systematic tail risk becomes important for forced CEO turnovers only in the presence of a major variation in the costs this risk generates for shareholders and the organization. (C) 2017 Elsevier B.V. All rights reserved.

Original languageEnglish
Pages (from-to)37-55
Number of pages19
JournalJournal of Accounting and Economics
Volume64
Issue number1
Early online date19 May 2017
DOIs
Publication statusPublished - Aug 2017

Keywords

  • tail risk
  • CEO turnover
  • bank governance
  • relative performance evaluation
  • market discipline
  • moral hazard
  • deposit insurance
  • financial instructions
  • corporate governance
  • earning management
  • information content
  • ownership structure
  • executive turnover

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