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New evidence on what happens to CEOs after they retire

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  • Lee, Changmin

Abstract

I analyze directorships held by CEOs who retired during the periods 1989-1993, 1995-1999 (before the Sarbanes-Oxley Act) and 2001-2005 (after the Sarbanes-Oxley Act). My results suggest that retired CEOs became less popular on boards after the Sarbanes-Oxley Act. In addition, although pre-retirement accounting performance helps explain the number of outside directorships a retired CEO held in the 1989-1993 sample, as Brickley et al. (1999) have found, it does not explain this number for the 1995-1999 sample and 2001-2005 sample. Third, a company's stock performance during a CEO's tenure is negatively related to the number of outside directorships only in the 2001-2005 sample. Fourth, the number of outside directorships is positively correlated with the size of a retired CEO's original firm before the Sarbanes-Oxley Act, but this is not the case after the Sarbanes-Oxley Act. Finally, if retired CEOs worked in regulated industries, their probability of serving at least one outside directorship 2Â years after retirement falls by 21% in the 1989-1993 sample. However, this negative effect is marginally significant in the 1995-1999 sample, and vanishes in the 2001-2005 sample.

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  • Lee, Changmin, 2011. "New evidence on what happens to CEOs after they retire," Journal of Corporate Finance, Elsevier, vol. 17(3), pages 474-482, June.
    • Handle: RePEc:eee:corfin:v:17:y:2011:i:3:p:474-482
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    Cited by:

    1. Benjamin S. Kay & Cindy M. Vojtech, 2015. "Corporate Governance Responses to Director Rule Changes," Staff Discussion Papers 15-02, Office of Financial Research, US Department of the Treasury.
    2. Ye, Miaomiao & Li, Mengzhe & Zeng, Qiannan, 2022. "Former CEO director and executive-employee pay gap," Pacific-Basin Finance Journal, Elsevier, vol. 76(C).
    3. Li, Mengzhe & Lan, Fei, 2022. "Former CEO directors and cash holdings," Economic Analysis and Policy, Elsevier, vol. 75(C), pages 320-334.
    4. Jun Hyeok Choi & Saerona Kim & Ayoung Lee, 2019. "CEO Tenure, Corporate Social Performance, and Corporate Governance: A Korean Study," Sustainability, MDPI, vol. 12(1), pages 1-17, December.
    5. James, Hui Liang & Wang, Hongxia & Xie, Yamin, 2018. "Busy directors and firm performance: Does firm location matter?," The North American Journal of Economics and Finance, Elsevier, vol. 45(C), pages 1-37.
    6. Liu, Baixiao & McConnell, John J. & Xu, Wei, 2017. "The power of the pen reconsidered: The media, CEO human capital, and corporate governance," Journal of Banking & Finance, Elsevier, vol. 76(C), pages 175-188.

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