The Role of Lending Banks in Forced CEO Turnovers

Material TypeArticleLanguageEnglish
TitleThe Role of Lending Banks in Forced CEO Turnovers Author(S)SADI OZELGE (Author)
Abstract  This article investigates the governance role of banks exercised through the replacement of underperforming CEOs in borrowing firms. An average level of bank loans outstanding implies a 22% to 47% increase in the forced turnover probability of a borrowing firm’s CEO if a firm’s industry adjusted performance is one standard deviation below average. This increase is much larger, 68% to 92%, when an underperforming firm violates its loan covenants. Overall, the paper’s findings suggest that banks play a key role in the governance of underperforming firms, especially when covenants are violated. ...Paginationp631–659
Journal TitleJournal of Money, Credit, and Banking  
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