Blown Away by Hurricane Katrina: The Impact of Exogenous Shocks on CEO Dismissals

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We utilize natural exogenous shocks to contrast alternative theoretical mechanisms underlying CEO dismissal. Specifically, in the context of major natural disasters, we analyze forced CEO dismissals occurring in over 2,500 US companies over 19 years (1994 -- 2013). When contrasting existing theoretical explanations (e.g., natural shocks to have a zero effect because they are exogenous to CEO quality; natural shocks to have a negative effect because boards aim for internal stability during times of external instability, etc.), we identify a novel mechanism. Specifically, our results suggest that boards utilize shocks as a publicly visible excuse to legitimize dismissals--highly visible, high-stakes decisions that are often controversial. For example, we find that shocks' entire dismissal effect goes back to CEOs showing low pre-shock peer-adjusted performance (i.e., signaling low quality) or that different board compositions (differing in their degree of aiming for public acceptance) moderate our main effect.
Original languageEnglish
Title of host publicationProceedings of the Eighty-second Annual Meeting of the Academy of Management
EditorsSonja Taneja
Number of pages1
Place of PublicationBriarcliff Manor, NY
PublisherAcademy of Management
Publication date2022
Publication statusPublished - 2022
EventThe Academy of Management Annual Meeting 2022: Creating a Better World Together - Seattle, United States
Duration: 5 Aug 20229 Aug 2022
Conference number: 82


ConferenceThe Academy of Management Annual Meeting 2022
Country/TerritoryUnited States
Internet address
SeriesAcademy of Management Proceedings

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