Voting with their Feet or Activism? Institutional Investors' Impact on CEO Turnover

Purpose The purpose of this paper is to investigate the effect of long horizon institutional ownership on CEO career concerns to meet the short-term earnings benchmark. Design/methodology/approach Using a sample of 10,565 firm-year observations in the USA, the paper examines the extent to which long horizon institutional investors mitigate the positive relation between CEO turnover and missing the quarterly consensus analyst forecast. Findings After controlling for the general performance-turnover relation, this paper finds that long horizon institutional investors mitigate the positive relation between CEO turnover and missing the quarterly consensus analyst forecast. This finding is stronger when CEOs focus on long-term value creation and do not sacrifice long-term value to boost current earnings and is stronger when the monitoring intensity by long horizon institutional investors is greater. Research limitations/implications The results suggest that long horizon institutional investors serve a monitoring role in alleviating CEO career concerns to meet the short-term earnings benchmark. Originality/value This paper contributes to the literature on the relation between long horizon institutional ownership and attenuated managerial short-termism. The literature is silent about why long horizon institutional investors alleviate managerial short-termism. This paper fills this void in the literature by documenting that long horizon institutional investors mitigate CEO career concerns for managerial short-termism. Moreover, this paper contributes to the literature on the monitoring role of institutional investors by documenting the incremental effect of institutional ownership on CEO career concerns to meet the short-term earnings benchmark.

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CEO and director compensation, CEO turnover and institutional investors: Is there cronyism in the UK?

Journal of Banking & Finance ◽

10.1016/j.jbankfin.2019.03.019 ◽

2019 ◽

Vol 103 ◽

pp. 18-35 ◽

Cited By ~ 3

Author(s):

Jie Chen ◽

Marc Goergen ◽

Woon Sau Leung ◽

Wei Song

Keyword(s):

Institutional Investors ◽

Ceo Turnover ◽

Director Compensation ◽

The Uk

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The Influence of Institutional Investors Over CEO Turnover in the UK

SSRN Electronic Journal ◽

10.2139/ssrn.991595 ◽

2008 ◽

Cited By ~ 3

Author(s):

Mike Strivens ◽

Susanne K. Espenlaub ◽

Martin Walker

Keyword(s):

Institutional Investors ◽

Ceo Turnover ◽

The Uk

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CEO Diversity, Political Influences, and CEO Turnover in Unstable Environments: The Romanian Case

Journal of Risk and Financial Management ◽

10.3390/jrfm13030059 ◽

2020 ◽

Vol 13 (3) ◽

pp. 59

Author(s):

Ingrid-Mihaela Dragotă ◽

Andreea Curmei-Semenescu ◽

Raluca Moscu

Keyword(s):

Corporate Governance ◽

Financial Crisis ◽

Board Of Directors ◽

Chief Executive Officer ◽

Institutional Investors ◽

Chief Executive ◽

Listed Companies ◽

Ceo Turnover ◽

The Political ◽

Financial Environment

This work expands the literature on a less studied topic, the Chief Executive Officer (CEO) turnover in post-communist economies, analyzed during an unstable and ambiguous economic and financial environment. For the period 2005–2010, the results indicate the political inference in CEO turnover decision for the Romanian listed companies. In this period, with great turmoil in the economy determined by the financial crisis of 2008, we also find that CEO gender helps to explain the probability of changing the CEO. Moreover, this paper empirically tests if the financial and corporate governance determinants that are validated in the existing literature work for the Romanian listed companies. We reinforce that CEO turnover decision is negatively related to accounting-based performance. We find evidence of the “voting with their feet” behavior of institutional investors, and of the lack of Board of Directors monitoring. The CEO–Chairman duality and the controlling power of the largest shareholder act as entrenchment mechanisms.

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Voting with their feet or activism? Institutional investors’ impact on CEO turnover

Journal of Corporate Finance ◽

10.1016/j.jcorpfin.2011.10.002 ◽

2012 ◽

Vol 18 (1) ◽

pp. 22-37 ◽

Cited By ~ 68

Author(s):

Jean Helwege ◽

Vincent J. Intintoli ◽

Andrew Zhang

Keyword(s):

Institutional Investors ◽

Ceo Turnover

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Institutional Investors on the Securities Market

Voprosy Ekonomiki ◽

10.32609/0042-8736-2003-8-95-101 ◽

2003 ◽

pp. 95-101

Author(s):

O. Khmyz

Keyword(s):

Financial Crisis ◽

Capital Market ◽

Hedge Funds ◽

Institutional Investors ◽

Securities Market ◽

Main Role ◽

Investment Funds ◽

Investment Process ◽

The Capital Market

Acording to the author's opinion, institutional investors (from many participants of the capital market) play the main role, especially investment funds. They supply to small-sized investors special investment services, which allow them to participate in the investment process. However excessive institutialization and increasing number of hedge-funds may lead to financial crisis.

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Pricing models of shares of Russian companies and their practical application

Voprosy Ekonomiki ◽

10.32609/0042-8736-2019-3-48-76 ◽

2019 ◽

pp. 48-76 ◽

Cited By ~ 1

Author(s):

Alexander E. Abramov ◽

Alexander D. Radygin ◽

Maria I. Chernova

Keyword(s):

Stock Market ◽

Institutional Investors ◽

Factor Model ◽

Investment Strategies ◽

Pricing Models ◽

Foreign Portfolio Investment ◽

Market Portfolio ◽

Stock Market Performance ◽

Long Time ◽

Russian Stock Market

The article analyzes the problems of applying stock pricing models in the Russian stock market. The novelty of the study lies in the peculiarities of the methodology used and the substantive conclusions on the specifics of the influence of fundamental factors on the pricing of shares of Russian companies. The study was conducted using its own 5-factor basic pricing model based on a sample of the most complete number of issues of shares of Russian issuers and a long time horizon, from 1997 to 2017. The market portfolio was the widest for a set of issuers. We consider the factor model as a kind of universal indicator of the efficiency of the stock market performance of its functions. The article confirms the significance of factors of a broad market portfolio, size, liquidity and, in part, momentum (inertia). However, starting from 2011, the significance of factors began to decrease as the qualitative characteristics of the stock market deteriorated due to the outflow of foreign portfolio investment, combined with the low level of development of domestic institutional investors. Also identified is the cyclical nature of the actions of company size and liquidity factors. Their ability to generate additional income on shares rises mainly at the stage of the fall of the stock market. The results of the study suggest that as domestic institutional investors develop on the Russian stock market, factor investment strategies can be used as a tool to increase the return on investor portfolios.

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