Voting with their feet：institutional ownership changes around forced CEO turnover.pdfVIP

Journal of Financial Economics 68 (2003) 3–46 Voting with their feet: institutional ownership changes aroun dforce dCEO turnover $ a, b a Robert Parrino *, Richar dW. Sias , Laura T. Starks a Department of Finance, University of Texas at Austin, Austin, TX 78712, USA b Department of Finance, Insurance, and Real Estate, Washington State University, Pullman, WA 99164, USA Receive d23 March 2000; accepte d21 March 2002 Abstract We investigate whether institutional investors ‘‘vote with their feet’’ when dissatisfie dwith a firm’s management by examining changes in equity ownership aroun dforce dCEO turnover. We fin dthat aggregate institutional ownership an dthe number of institutional investors decline in the year prior to force dCEO turnover. However, selling by institutions is far from universal. Overall, there is an increase in shareholdings of individual investors an da decrease in holdings of institutional investors who are more concerne dwith holding prudent securities, are better informed, or are engage din momentum trading. Measures of institutional ownership changes are negatively relate dto the likelihoods of force dCEO turnover an dthat an executive from outside the firm is appointe dCEO. r 2002 Elsevier Science B.V. All rights reserved. JEL classification: G20; G30; G32; G34 Keywords: Corporate governance; Institutional investors; CEO turnover $ The authors thank an anonymous referee, Anup Agrawal, Ken Lehn, Lance Nail, Tim Opler, Kemal Saatcioglu, Theo Vermaelen, Davi dWhidbee, an dse