Graduation Year

Spring 2012

Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts

Department

Economics

Reader 1

Jungmo Yoon

Reader 2

Jay Conger

Terms of Use & License Information

Terms of Use for work posted in Scholarship@Claremont.

Rights Information

© 2012 Robert Miller

Abstract

This paper studies a sample of CEOs from companies listed in the Dow Jones Industrial Average from 1992 to 2010, and confirms the theory that board members rely more heavily on firm performance measures for turnover and compensation decisions when less is known about the CEO’s ability. In this paper, I make two contributions to the literature. First, I confirm the empirical findings of literature with a new data set showing that the effect of firm performance on CEO turnover declines over a CEO's tenure. Second, I introduce a new tool, the relationship between CEO compensation and firm performance, for testing the effects of CEO tenure on board member decisions. The evidence indicates that the relationship between firm performance and CEO compensation declines over a CEO's tenure. Collectively, the results of this paper support the theory that board members gradually learn the CEO's ability over his tenure, therefore their decisions for turnover and compensation depend more on firm performance for a new CEO.

This thesis is restricted to the Claremont Colleges current faculty, students, and staff. It is not available for interlibrary loan. Please send a request for access through Contact Us.

Share

COinS