We identify the power of institutional blockholders to influence management using previous occurrences of forced CEO turnover at other firms in the blockholders’ overall portfolio. We create a “powerful blockholder linkage” measure that strongly predicts future forced CEO turnover. These effects are larger when “powerful” blockholders are more motivated to monitor and when they have had valuable monitoring experience. Moreover, firms with powerful blockholders display higher CEO turnover-performance sensitivity, pursue more value-increasing mergers, and have higher firm value. Overall, our results suggest that an identifiable group of powerful blockholders play an important role in corporate governance.
Institutional Blockholders, CEO Turnover, Corporate Governance
Corporate Finance | Finance and Financial Management
European Finance Association 2017 Annual Meeting, Mannheim, Germany, August 23-26
City or Country
WEI, Chi Shen and ZHANG, Lei.
Powerful blockholders and CEO turnover. (2017). European Finance Association 2017 Annual Meeting, Mannheim, Germany, August 23-26. 1-58. Research Collection Lee Kong Chian School Of Business.
Available at: http://ink.library.smu.edu.sg/lkcsb_research/5381
Copyright Owner and License
Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.