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The Cyclicality of CEO Turnover

Author

Listed:
  • Liebersohn, Carl

    (Ohio State U)

  • Packard, Heidi

    (U of Michigan)

Abstract

CEO turnover is highly pro-cyclical. This paper aims to explain why. We begin by showing that the cyclicality is driven almost entirely by executives of retirement age. We further provide evidence that executives time their retirement to maximize the value of their pensions. Since CEO pay is pro-cyclical and pensions are based on pay in the final years of tenure, executives have the incentive to retire when the economy is doing well. Cyclicality is particular strong in firms with strong corporate governance, which suggests that retirement cyclicality is a tool firms use to constrain CEO behavior.

Suggested Citation

  • Liebersohn, Carl & Packard, Heidi, 2019. "The Cyclicality of CEO Turnover," Working Paper Series 2019-32, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    • Handle: RePEc:ecl:ohidic:2019-32
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    More about this item

    JEL classification:

    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions

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