We study the relationship between credit rating changes and CEO turnover beyond firm performance. Within an adverse selection framework that explicitly incorporates rating change related turnover, our model predicts that a downgrade triggers turnover, even following a good firm performance. Our empirical results support this prediction. We show that credit rating downgrades explain forced turnover risk, both internal and external, after accounting for the firm prior stock market and accounting performance. Further, we find that the relationship between credit rating changes and management turnover is stronger when the degree of managerial entrenchment is low. Our results are robust to endogeneity concerns and shed light on the idea that the information content of credit ratings goes beyond firms’ performance.

Credit Ratings, CEO Entrenchment, and Turnover: The Information Content of Credit Ratings Beyond Firm Performance

MENICHINI, Anna Maria Cristina
;
2016

Abstract

We study the relationship between credit rating changes and CEO turnover beyond firm performance. Within an adverse selection framework that explicitly incorporates rating change related turnover, our model predicts that a downgrade triggers turnover, even following a good firm performance. Our empirical results support this prediction. We show that credit rating downgrades explain forced turnover risk, both internal and external, after accounting for the firm prior stock market and accounting performance. Further, we find that the relationship between credit rating changes and management turnover is stronger when the degree of managerial entrenchment is low. Our results are robust to endogeneity concerns and shed light on the idea that the information content of credit ratings goes beyond firms’ performance.
File in questo prodotto:
Non ci sono file associati a questo prodotto.

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11386/4676636
 Attenzione

Attenzione! I dati visualizzati non sono stati sottoposti a validazione da parte dell'ateneo

Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus ND
  • ???jsp.display-item.citation.isi??? ND
social impact