The relationship between firm performance and CEO turnover with CEO entrenchment as a moderator: An empirical study on the Swedish market
Sammanfattning: Purpose: The aim of this thesis is to explain how prior firm performance affects CEO turnover with the moderating role of CEO entrenchment on the Swedish market. Theoretical perspectives: The theoretical framework provides different aspects which highlights corporate governance in a Swedish context and the impact of CEO entrenchment from an agency theory perspective. Stewardship theory is provided as an additional theory to get a broader understanding of the relationship between prior firm performance and CEO turnover. The theoretical contribution of the thesis lays in argumentation for the relationship of concepts under study. Methodology: This study adopts deductive reasoning and employs quantitative analysis by using the non-linear logistic regression model. The dataset is longitudinal, thus all CEO turnovers are included in the analysis. Separate robustness tests are conducted to evaluate forced CEO turnovers and if the main results are affected by the logistic regression structure. Empirical Foundation: All companies listed on Nasdaq OMX Stockholm were included in the original sample during the 1st of January 2012 to 31th December 2014. After adjustments, the final sample consisted of 666 observations, 222 companies and 83 CEO turnovers. Conclusions: Consistent with previous research our results partly show that there is a significant negative relationship between prior firm performance and CEO turnover, indicating that CEOs delivering poor financial performance will be replaced. However, this classical relationship is not moderated by the aspect of CEO entrenchment on the Swedish market and the thesis suggests explanations to these non-findings. Some of the more interesting findings indicate that instead of playing a moderating role, CEO entrenchment has a direct effect on the CEO turnover outcome.
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