We examine the relationship between the monitoring of CEOs by inside and outside directors and CEO turnover in the Australian market. Australian board structures and mechanisms are more similar to those in the US/UK but market activity characteristics are more similar to Japanese/German systems. The results suggest that there is a relationship between CEO turnover and lagged performance rather than current performance as found in the US. In addition, non-executive directors and independent directors are more likely to monitor management. However, there is a size effect as the results are driven by large firms. The difference in the results may be due to differences in the behaviour of United States and Australian institutional stockholders in solving corporate governance issues. Furthermore, a negative lagged market reaction is found on the announcement of the CEO change. However, the reaction is driven by a sub-sample of firms with non-independent boards and prior positive performance that may proxy for retirements.
All Science Journal Classification (ASJC) codes
- Economics and Econometrics