The Effects of Executive, Firm, and Board Characteristics on Executive Exit

Date01 November 2016
Published date01 November 2016
The Financial Review 51 (2016) 527–557
The Effects of Executive, Firm, and Board
Characteristics on Executive Exit
John Becker-Blease
College of Business, OregonState University
Susan Elkinawy
Hilton Center for Business, Loyola Marymount University
Christopher Hoag
Trinity College
Mark Stater
Trinity College
We estimate a hazard model of the probability of top corporate executives exiting their
firms overthe period 1996–2010. Our main findings are that: (1) female executives have greater
likelihoods of exit than males, (2) the likelihood of exit increases with the independence of
the board and decreases with the fraction of the board that is female and the average age of
board members, and (3) a higher percentage of independent directors on the board lowers the
probability of exit more for females than for males. Further, controlling for exit risk reduces
the well-documented compensation differential between men and women.
Corresponding author: Department of Economics, TrinityCollege, 300 Summit St., Hartford, CT 06106;
Phone: 860-297-4078; Fax: 860-297-2163; E-mail:
The authors would like to thank seminar participants at the WesternEconomic Association annual meeting
(Seattle, 2013) and Loyola Marymount University, as well as two anonymousreferees and the editor for
valuable insights. All remaining errors are our own.
C2016 The Eastern Finance Association 527
528 J. Becker-Blease et al./The Financial Review 51 (2016) 527–557
Keywords: corporate executives, job turnover, board of directors, firm performance, hazard
JEL Classifications: G30, G34, J16, J44
1. Introduction
Significant change in the composition of the executive suite has occurred in
recent decades, particularly in the length of time executives remain employed in
their firms as well as in the gender composition of the profession. Cappelli and
Hamori (2005) find that among Fortune 100 firms, the average tenure of executives
dropped by more than five years from 1980 to 2001. Also, in 1980 there were no
female executives in these firms, but over the subsequent 20-year period, women
not only entered the executive ranks, but they also reached the highest ranks faster
than men did. These trends suggest that the workforce has become increasingly
dynamic and that corporate stakeholders recognize value in diversity. However, the
relative scarcity of women in the top ranks attracts media attention when one leaves
her position unexpectedly. The forced departure of Carly Fiorina, Hewlett-Packard’s
chief executive,in 2005 made national headlines. More recently, the sudden departure
of Jill Abramson as executive editor of the New York Times was discussed in a Wall
Street Journal article, as she was the second top female to leave the firmsuddenly in
fewer than three years (Trachtenberg and Marr, 2014).
In this paper, we use a data set compiled from multiple sources to examine the
factors that determine the tenure of top executive officers with their firms as well
as how those factors differ by gender. While previous studies have compared the
reasons for exit between male and female executives (Becker-Blease, Elkinawy and
Stater, 2010), we focus on how long executives remain employed. Executive tenure
is an issue for corporate governance due to the potential relation between tenure and
shareholder wealth, and for public policy as the longevity of executives is related to
wealth acquisition and influence. While long tenure can promote stability and allow
a corporation to strengthen its market position as the executive gains experience,
excessive tenure can also lead to entrenchment and to overly risk-averse behavior
that is detrimental to firm survival and performance. Indeed, McClelland, Barker and
Oh (2012) find that chief executive officer (CEO) paradigms become increasingly
obsolete as tenure increases, albeit only in dynamic industries where the operating
environment undergoes frequent change. Gender differences in executive tenure may
also reflect imperfections in the labor market.
While the primary motivation for our study is to understand tenure, approaching
the problem with a survival analysis model allows us to readily address censoring
problems that are posed by the data. Nonetheless, as there is a tight theoretical
connection between the risk of exit from a state or condition in any given time
period and the total amount of time spent there, our approach of studying the hazard

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