Are Generalists Beneficial to Corporate Shareholders? Evidence from Exogenous Executive Turnovers. (March 2020)

• Record Type: Journal Article
• Authors: Betzer, André; Lee, Hye Seung (Grace); Limbach, Peter; Salas, Jesus M.
• Is Part Of: Journal of financial and quantitative analysis. Volume 55:Number 2(2020)
• Page Start: 581
• Page End: 619
• Publication Date: 2020-03
• Subjects: Finance -- Periodicals; Investments -- Mathematics -- Periodicals; 332.05
• DOI: 10.1017/S0022109018001400
• Languages: English
• ISSNs: 0022-1090

Abstract

Abstract : This study finds a positive, economically meaningful impact of generalist chief executive officers (CEOs) on shareholder value using 164 sudden deaths and 345 non-sudden exogenous turnovers. The higher a departing CEO's general ability index (GAI), independently and relative to her successor, the lower is the abnormal stock return to turnover announcements. Returns reflect post-turnover changes in operating performance. Further, CEOs' and successors' GAIs are significantly positively related, but only for non-sudden turnovers. Consistently, for sudden deaths, we find positive stock returns to appointments of generalist successors. The results provide a market-based explanation for the generalist pay premium.