“Are Public Firm CEO Turnover-Performance Sensitivities Actually Too High? Evidence from Large Private Firms” by Huasheng Gao
Nanyang Technological University
University of Washington
University of British Columbia
We compare CEO turnover in public and large private firms. Public firms have higher CEO turnover rates and exhibit greater turnover-performance sensitivity than private firms. Controlling for pre-turnover performance, improvements are greater following CEO turnover for private firms than for public firms. We investigate whether these differences are due to differences in CEO power, ownership, board structure, quality of accounting information, the CEO labor market, investor horizon, or some unobservable characteristics between public and private firms. We conclude that investor myopia associated with the public equity market is the primary contributor to the greater turnover and turnover-performance sensitivity in public firms compared to private firms.