Aghamolla, C., & Hashimoto, T. (2020). Information arrival, delay, and clustering in financial markets with dynamic freeriding. Journal of Financial Economics, 138(1), 27-52.

Abstract

Aggressive Boards and CEO Turnover∗ Cyrus Aghamolla† Tadashi Hashimoto‡ January 4, 2021 Abstract This study investigates a communication game between a CEO and a board of directors where the CEO’s career concerns can potentially impede value-increasing informative communication. By adopting a policy of aggressive boards (excessive replacement), shareholders can facilitate communication between the CEO and the board. The results are in contrast to the multitude of models which generally find that management-friendly boards improve communication, and help to explain empirical results concerning CEO turnover. The results also provide the following novel pre- dictions concerning variation in CEO turnover: (i) there is greater CEO turnover in firms or industries where CEO performance is relatively more difficult to assess; (ii) the board is more aggressive in their replacement of the CEO in industries or firms where the board’s advisory role is more salient; and (iii) there is comparatively less CEO turnover in firms or industries where the variance of CEO talent is high.