A Simple Model of Optimal CEO Turnover

Authors

Jeff Brookman, University of Nevada, Las VegasFollow
Paul D. Thistle, University of Nevada, Las VegasFollow

Document Type

Preprint

Publication Date

3-30-2006

Abstract

We examine the board of directors’ problem of determining when to terminate a CEO. The optimal policy takes a simple form – the CEO is fired if profits fall below a critical value. The analysis yields the optimal probability of CEO turnover.

Keywords

corporate governance; real options; optimal stopping

Repository Citation

Brookman, J., Thistle, P. D. (2006). A Simple Model of Optimal CEO Turnover.