Board of Directors Characteristics and Their Relationship to CEO Turnover

Abstract

We study how independent directors behaviour and personal characteristics affects CEO turnover as well as firm performance. The likelihood for him to be replaced after poor firm performance and what impact board diversity has on firm performance. The two main board characteristics studied in this thesis is experienced and how diversified the board is. The experience measure has two main components, both an age threshold and a dummy variable capturing involvement in multiple boards. We measure diversity within the board by three factors; gender, nationality and number of independent directors. Two versions of the diversity measure are included in our specifications, one less strict than the other. We find a negative significant relationship between older independent directors and CEO turnover. We find no statistically significant results for earlier firm performance on CEO turnover. However, we find a significant result with the less strict board diversity measure to firm performance and it matches our prediction that firm performance increases with a more diverse board.