CEO turnover in large banks : does tail risk matter?

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

Abstract

Using a unique international dataset, we show that the CEOs of large banks exhibit an increased probability of forced turnover when their organizations are more exposed to idiosyncratic tail risks. The importance of idiosyncratic tail risk in CEO dismissals is strengthened when there is more competition in the banking industry and when stakeholders have more to lose in the case of distress. Overall, we document that the exposure to idiosyncratic tail risk offers valuable signals to bank boards on the quality of the choices made by CEOs and these signals are different from those provided by accounting and market measures of bank performance and by idiosyncratic volatility. In contrast, systematic tail risk is usually filtered out from the firing decision, only becoming important for forced CEO turnovers in the presence of a major variation in the costs that the exposure to this risk generates for shareholders and the organization.

Citation

Srivastav, A., Keasey, K., Mollah, S., & Vallascas, F. (2017). CEO turnover in large banks : does tail risk matter?. Journal of Accounting and Economics, 64(1), 37-55. https://doi.org/10.1016/j.jacceco.2017.05.001

• Journal Article Type: Article
• Acceptance Date: May 15, 2017
• Online Publication Date: May 19, 2017
• Publication Date: 2017-08
• Deposit Date: May 23, 2017
• Publicly Available Date: May 20, 2019
• Journal: Journal of accounting and economics
• Print ISSN: 0165-4101
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 64
• Issue: 1
• Pages: 37-55
• DOI: https://doi.org/10.1016/j.jacceco.2017.05.001
• Keywords: Tail risk; CEO turnover; Bank governance
• Public URL: https://hull-repository.worktribe.com/output/451566
• Publisher URL: http://www.sciencedirect.com/science/article/pii/S0165410117300307
• Related Public URLs: http://eprints.whiterose.ac.uk/116747/
• Additional Information: This is the accepted manuscript of an article published in Journal of accounting and economics, 2017. The version of record is available at the DOI link in this record.
• Contract Date: May 23, 2017