Research

Changes in CEO Compensation Structure and the Impact on Firm Performance Following CEO Turnover

We document changes in compensation structure following CEO turnover and relate them to future performance. Compared to outgoing CEOs, incoming CEOs derive a significantly greater percentage of their compensation from option grants and new stock grants. The voluntary turnover sample shows similar changes in compensation structure while the forced turnover sample results suggest that new stock grants drive the significant increase in incentive compensation following turnover. Post-turnover performance is positively associated with new stock grants as a percentage of total compensation in the full sample and when analyzing forced and voluntary turnovers separately. We find limited evidence that future operating income is positively associated with option grants following forced turnover. Post-turnover improvement in operating income is positively associated with an increase in new stock grants for the incoming relative to the outgoing CEO.

Publication Information
Article Title: Changes in CEO Compensation Structure and the Impact on Firm Performance Following CEO Turnover
Journal: Review of Quantitative Finance and Accounting (Aug, 2007)
Author(s): Blackwell, David W.;  Dudney, Donna;  Farrell, Kathleen A
Researcher Information
    
Dudney, Donna
Dudney, Donna
Associate Dean of Undergraduate Curriculum and Programs
Expertise:
  • Financial Institutions
  • Financial Markets & Investing
  • Managerial Economics
Finance
CoB 301 G
P.O. Box 880490
University of Nebraska-Lincoln
Lincoln, NE 68588-0490, USA
Phone: (402) 472-5695
Fax: (402) 472-5180
ddudney@unl.edu
Farrell, Kathleen A
Farrell, Kathleen A
James Jr. and Susan Stuart Endowed Dean of the College of Business
Expertise:
  • Corporate Finance
  • Executive Compensation
Dean's Office
CoB 301 D
P.O. Box 880405
University of Nebraska-Lincoln
Lincoln, NE 68588-0405, USA
Phone: (402) 472-9500
Fax: (402) 472-5140
kfarrell2@unl.edu