Company Board Characteristics and Their Effect on CEO Turnover
Loading...
URL
Journal Title
Journal ISSN
Volume Title
School of Business |
Master's thesis
Unless otherwise stated, all rights belong to the author. You may download, display and print this publication for Your own personal use. Commercial use is prohibited.
Authors
Date
2019
Department
Major/Subject
Mcode
Degree programme
Accounting
Language
en
Pages
50
Series
Abstract
This thesis studies the effects of company board diversity and CEO board membership on CEO turnover. Increasing gender diversity in the top management of companies has been a hot topic in media in recent years. Gender quotas on boards of directors have been implemented in several countries and more are planned. Age diversity has also been a topic for discussion and research albeit no quotas have been implemented on it yet. CEO being simultaneously chairman of the board is a common albeit somewhat criticised practice. There are no legal limitations on it yet. Academic studies have surveyed the effect of board characteristics not only on financial performance but also CEO turnover. CEO turnover is an important sign of board activity. It is therefore used as a proxy to measure how different variables affect board activity. The aspects studied in this thesis include i.a. board gender diversity, age diversity, CEO board membership and unexpected earnings change on CEO turnover. The data is from the database of Suomen Asiakastieto Oy ranging from years 2005 to 2014. The sample studied is large and consists of non-listed Finnish companies large enough to have at least three board members. The main analyses are done with binomial logistic regression with CEO change as the dichotomous dependent variable. The study has similarities with those of Weisbach (1988) in terms of variable formation and setup. The results of this study are partially in line with earlier literature. Increasing age diversity was found to decrease CEO turnover with all studied analysis settings. Increasing gender diversity was found to decrease CEO turnover in companies with smaller boards but in companies with larger boards the predictor was statistically insignificant. Increasing unexpected earnings change, i.e. overperformance relative to peers, was found to have a negative effect on CEO turnover in most analyses performed. CEO being on board was found to have a negative effect on CEO turnover in companies with smaller boards. With larger boards, however, the effect was reversed. The effects of gender diversity and age diversity suggest that increasing them decreases board activity/monitoring power. Positive earnings performance relative to peers had a negative effect on turnover as expected. The effect of CEO board membership was as expected in smaller companies but surprising in larger companies. The results indicate that if one wants a board that can take a more active role, one should have a less age and gender diverse board. In smaller companies the board should be without CEO.Description
Thesis advisor
Ikäheimo, SeppoKeywords
board age diversity, board gender diversity, board independence, CEO tenure, CEO turnover