Review of Quantitative Finance and Accounting

, Volume 29, Issue 3, pp 315–338

Changes in CEO compensation structure and the impact on firm performance following CEO turnover

  • David W. Blackwell
  • Donna M. Dudney
  • Kathleen A. Farrell
Original Paper

DOI: 10.1007/s11156-007-0034-y

Cite this article as:
Blackwell, D.W., Dudney, D.M. & Farrell, K.A. Rev Quant Finan Acc (2007) 29: 315. doi:10.1007/s11156-007-0034-y


We document changes in compensation structure following CEO turnover and relate them to future performance. Compared to outgoing CEOs, incoming CEOs derive a significantly greater percentage of their compensation from option grants and new stock grants. The voluntary turnover sample shows similar changes in compensation structure while the forced turnover sample results suggest that new stock grants drive the significant increase in incentive compensation following turnover. Post-turnover performance is positively associated with new stock grants as a percentage of total compensation in the full sample and when analyzing forced and voluntary turnovers separately. We find limited evidence that future operating income is positively associated with option grants following forced turnover. Post-turnover improvement in operating income is positively associated with an increase in new stock grants for the incoming relative to the outgoing CEO.


Executive compensation CEO turnover Compensation structure Firm performance 

JEL Classifications

G34 J31 J33 J63 M52 

Copyright information

© Springer Science+Business Media, LLC 2007

Authors and Affiliations

  • David W. Blackwell
    • 1
  • Donna M. Dudney
    • 2
  • Kathleen A. Farrell
    • 2
  1. 1.Department of Finance, Mays Business SchoolTexas A&M UniversityCollege StationUSA
  2. 2.Department of FinanceUniversity of Nebraska-LincolnLincolnUSA

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