Abstract
This study investigates the impact of Chief Executive Officer (CEO) succession on a firm's financial constraints. Using panel data consisting of CEO turnover and non-turnover cases of listed companies in China, we find that new CEOs play a significant role in alleviating a firm's financial constraints. Specifically, the level of cash holdings, the investment to cash flow sensitivity, and the cash to cash flow sensitivity all decline following a new CEO's succession. These effects are stronger in cases where the turnovers are forced and the firms are more financially constrained.
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