Abstract
Abstract CEO turnover is highly pro-cyclical. This paper aims to explain why. I begin by showing that the cyclicality is driven entirely by executives of retirement age, and I develop several hypotheses to explain this. I test them using executive pension data released following a 2006 SEC rule change. The theory with the strongest support is that executives time their retirement to maximize the value of their pensions. Since CEO pay is pro-cyclical and pensions are based on pay in the final years of tenure, executives have the incentive to retire when the economy is doing well. I show that cyclicality is particularly strong in firms with weak corporate governance and that announcement returns are negative in these firms, which suggests that retirement cyclicality is not welfare-enhancing.
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