The Effect of Ex-ante CEO Turnover Risk on Firms’ Discretionary Expenditures

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This study investigates whether CEOs' involuntary turnover risk affects their decisions on discretionary investment expenditures and the subsequent influence of those decisions on firms' actual turnover results. Using the sample of CEO turnover over the period 1993-2010, we find that managers facing ex-ante high, involuntary turnover risk are more likely than others to reduce research and development expenses and capital expenditures. These results imply that turnover risk induces CEOs' myopic decisions, which helps them to survive in the firm. However, those decisions on discretionary expenditures and actual turnover are likely to hurt firm value because firms keep low-ability managers and face consequences of myopic decisions that are detrimental to the firms in the long run.
Publisher
Creighton University
Issue Date
2018-01
Language
English
Citation

Quarterly Jouranl of Finance & Accounting, v.56, no.1&2, pp.53 - 90

ISSN
1939-8123
URI
http://hdl.handle.net/10203/245440
Appears in Collection
MT-Journal Papers(저널논문)
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