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Table 9 Variable definitions

From: The impact of CEO turnover on firm performance around interim successions

Variable name Definition Source
Panel A: Performance measures
Return on assets (ROA) Quarterly ROA (net income divided by book value of assets) over the four post-turnover quarters (Q1, Q2, Q3, and Q4) beginning on the first full quarter following the turnover announcement Compustat
Change in ROA The change in ROA from the pre-succession quarter over the period one, two, three, and four quarters following the CEO turnover Compustat
Tobin’s Q Quarterly market value of assets divided by book value of assets over the four post-turnover quarters (Q1, Q2, Q3, and Q4) beginning on the first full quarter following the turnover announcement Compustat
Return on equity (ROE) Quarterly ROE (net income divided by common equity) over the four post-turnover quarters (Q1, Q2, Q3, and Q4) beginning on the first full quarter following the turnover announcement Compustat
Stock returns Buy-and-hold returns for each quarter (Q1, Q2, Q3, and Q4) following the turnover announcement, beginning on the first month following the turnover announcement date CRSP
Panel B: Control variables
Pre-succession ROA ROA in the quarter immediately prior to the turnover announcement. Note that pre-succession Tobin’s Q and pre-succession ROE are calculated similarly using Tobin’s Q and ROE, respectively Compustat
Pre-succession ROA change The change in quarterly ROA during the 4 quarters prior to the turnover announcement. Note that pre-succession Tobin’s Q and pre-succession ROE are calculated similarly using Tobin’s Q and ROE, respectively Compustat
Industry pre-succession ROA The average quarterly industry ROA, as measured by 2-digit SIC code, for the four quarters prior to the turnover announcement Compustat
Note that industry pre-succession Tobin’s Q and industry pre-succession ROE are calculated similarly using Tobin’s Q and ROE, respectively
Industry post-succession ROA Quarterly industry ROA, as measured by 2-digit SIC code, in the post-succession period. Note that industry post-succession Compustat
Tobin’s Q and industry post-succession ROE are calculated similarly using Tobin’s Q and ROE, respectively
Firm size The log of book assets in the quarter prior to the turnover announcement Compustat
CEO age The log of predecessor age the year of the turnover announcement Execucomp or hand collected
CEO tenure The log time (measured in years and months) that the predecessor held the CEO post Execucomp or hand collected
CEO ownership The percentage ownership of the predecessor, as measured at the period prior to the turnover Execucomp or hand collected
Inside CEO Succession A dummy set equal to one when the appointed successor comes from within the firm Execucomp or hand collected
Diversification Jacquemin and Berry (1979) measure calculated for the year of the turnover. The ratio of sales in each industry-segment (measured by 4-digit SIC code) is calculated relative to total sales. This measure is then multiplied by the minus log of the same measure Compustat
Leverage Average quarterly leverage ratio (book debt scaled by the sum of book debt and market equity) over the four quarters prior to the turnover announcement Compustat
Industry instability We first calculate total industry sales (as measured by 4-digit SIC code) over the 3 year period prior to the turnover announcement. For each industry, we then regress the 3 year industry sales on time to obtain the standard error of slope. The industry instability is the standard error divided by average sales over this period Compustat
CEO duality A dummy variable set equal to one when the CEO was also the chairman of the board Hand collected
Board ownership The percentage ownership of all board members (excluding the CEO), as measured at the period prior to the turnover Hand collected
Percentage of outside directors The percentage of outsiders on the board of directors, as measured at the period prior to the turnover Hand collected
Board size The number of board members, as measured at the period prior to the turnover Hand collected
No succession plan A dummy variable set equal to one if the firm lacks a president/COO separate from the CEO Hand collected
Interim succession A dummy variable set equal to one if the firm appoints a temporary interim succession at the time of the turnover announcement Hand collected
Died A dummy variable set equal to one if the predecessor died while holding the CEO designation Hand collected
Illegal A dummy variable set equal to one if the predecessor departs due to illegal activities Hand collected
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