Abstract
In this study, we examine how changes in credit risk around CEO turnover announcements are affected by the nature of the succession (forced vs. voluntary), outgoing CEO’s legacy, and concentration of job titles. We find that firms whose incumbent is forced out experience a greater increase in credit default swap (CDS) spreads than firms with voluntary departures, especially when the influence of the outgoing CEO lingers or the CEO is powerful. These results provide new insights into sources of uncertainty around CEO turnovers and extend the literature on the determinants of CDS spreads around this corporate event.
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