Abstract
This paper examines the relation between political regime change, a new president from a new party, and propensity for CEO turnover. Our key conjecture is that some companies, especially those that are politically sensitive, will politically reposition to adapt to the new political regime, and this political repositioning will be reflected in increased CEO turnover. We find support for this hypothesis, for CEO turnover is at least 24% more likely to happen following political regime change. The economic significance of this CEO political repositioning varies by company characteristics, with repositioning greater among large cap stocks, stocks held by short term investors, and sectors that are politically sensitive. However, political repositioning decreases stock performance relative to the sector, though this effect is weakly significant. These results suggest that political regime change causes firms to reevaluate the required skills of the CEO. Collectively, we find that political repositioning is an important determinant of CEO turnover.
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