Abstract
In this paper, we examine the motivation behind mandatory retirement policies that force CEOs to retire. Consistent with these policies being effective ways to ease out CEOs, we find that firms without mandatory retirement policies are valued lower and have poorer operating performance than other firms. We also find that mandatory retirement policies help “smooth” CEO successions. We do not observe a relation between CEO age and firm performance, suggesting that firms can increase mandatory retirement age without an adverse impact on firm value.
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