CEO Turnover, Information Uncertainty, and Debt Contracting

Quarterly Journal of Finance, Forthcoming

54 Pages Posted: 16 Jan 2016 Last revised: 21 Oct 2018

See all articles by Saiying Deng

Saiying Deng

Kent State University

Vincent Intintoli

Clemson University, Department of Finance

Andrew (Jianzhong) Zhang

University of Nevada, Las Vegas - Department of Finance

Date Written: October 18, 2018

Abstract

CEO turnovers are important corporate events that can lead to significant changes within the firm. We find that CEO departures are associated with a subsequent increase in bank loan financing. The negative effect that CEO departures have on borrowing costs is largely driven by forced CEO turnovers. Following such departures, firms pay higher loan spreads, see an increase in covenants, and are more likely to be subject to collateral requirements, when compared to matched non-turnover and voluntary turnover firms. Evidence suggests that asset substitution and changes in accounting information quality helps to explain the observed worsened terms following forced dismissals. On the other hand, more traditional voluntary departures are unrelated to changes in price and non-price loan terms.

Keywords: CEO Turnover, Bank Loan Terms, Information Uncertainty, Forced Turnover

JEL Classification: G21, G32, M41

Suggested Citation

Deng, Saiying and Intintoli, Vincent and Zhang, Andrew (Jianzhong), CEO Turnover, Information Uncertainty, and Debt Contracting (October 18, 2018). Quarterly Journal of Finance, Forthcoming , Available at SSRN: https://ssrn.com/abstract=2715553 or http://dx.doi.org/10.2139/ssrn.2715553

Saiying Deng

Kent State University ( email )

College of Business Administration
P.O. Box 5190
Kent, OH 44242-0001
United States
3306721213 (Phone)

Vincent Intintoli (Contact Author)

Clemson University, Department of Finance ( email )

Clemson, SC 29634
United States
864-656-2263 (Phone)

Andrew (Jianzhong) Zhang

University of Nevada, Las Vegas - Department of Finance ( email )

4505 S. Maryland Parkway
Box 456008
Las Vegas, NV 89154-6008
United States

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