CEO Turnover: Governance, Games and Real Options

<p>The decision a Board of Directors (a board) makes to dismiss or retain its CEO is one of extreme importance in its role of representing shareholder interests and maximising shareholder value. This thesis presents three independent but highly related studies pertaining to the dynamics between a board and its selected CEO in deciding to retain or replace an incumbent manager. The first study presents a theoretical model of CEO turnover that is examined in order to develop new empirical testable predictions. The model employs a learning process for perceived CEO ability that offers new insight into the dynamics of the problem. We find empirical support for the theoretical predictions that: (1) if a CEO sends high noise performance signals to the board relative to the pool of possible replacements, the probability of turnover will be less sensitive early on in the manager’s tenure and more sensitive later due to the learning process; (2) the probability of turnover for a CEO who has a lower level of initial uncertainty relative to a pool of possible replacements will be less sensitive to performance because the CEO will need to be considered high quality to get the position in the first place; and (3) there is empirical evidence to support the notion that ongoing volatility in the board’s estimate of a manager’s ability plays a role in the updating process of ability assessment by a board. Recent empirical work has indicated that board-induced CEO turnover is a function of industry business cycles and not just relative performance evaluation. The literature notes that this could be because: (1) CEOs may optimally be rewarded or punished for peer group performance if a CEO’s actions affect peer performance; (2) boards receive more, or better information in industry downturns than they do during booms; or (3) boards misattribute industry performance to CEO ability. The literature concludes (3) largely due to the results not being sensitive to CEO tenure, where high tenure CEOs should have proven themselves in good and bad times. There is however no theoretical framework to help interpret these empirical findings and we consider conclusions incomplete. It is well established in the macroeconomic literature that downturns are highly correlated with increased levels of uncertainty, and as a result firm behaviour is impacted. The second study in this thesis presents a model of board-induced CEO turnover that allows analysis under two stochastic state variables: (1) perceived managerial ability; and (2) precision of the perceived ability. We use the constructed model to show that, following shocks that increase uncertainty, the probability of turnover for high tenure CEOs may be higher or lower than low tenure CEOs depending on the board’s estimate of CEO ability. This casts doubt on conclusions made from the findings of the empirical literature. The final study presented by this thesis is my job market paper. It presents a new game of performance-induced CEO turnover that analyses CEO turnover decisions in a context where the CEO and the board both have meaningful options. We show that under certain conditions a CEO has the incentive to lock in a high level of perceived ability, through good firm performance, and exercise their option to leave for other roles and increased prestige. This creates an upper and lower threshold for performance-induced CEO turnover. The lower threshold relates to the board’s option to terminate a low-quality CEO and the upper threshold relates to a high-quality CEO’s option to leave the firm. The upper threshold creates a credible threat for the board that affects its decision making. We define two types of threats: (1) the persistent threat, where the firm is one where the incumbent and any replacement will have an upper threshold; and (2) a unique threat, where only the incumbent has the upper threshold and replacements are taken from a pool of candidates who do not have an upper threshold. We estimate that both threat types have a negative impact on firm value. Empirically we find that consistent with the theory, the probability of a turnover event increases following positive relative accounting performance for small firms and firms with young CEO’s, indicating upper threshold constraints for these two groups.</p>

CEO Turnover: Governance, Games and Real Options

<p>The decision a Board of Directors (a board) makes to dismiss or retain its CEO is one of extreme importance in its role of representing shareholder interests and maximising shareholder value. This thesis presents three independent but highly related studies pertaining to the dynamics between a board and its selected CEO in deciding to retain or replace an incumbent manager. The first study presents a theoretical model of CEO turnover that is examined in order to develop new empirical testable predictions. The model employs a learning process for perceived CEO ability that offers new insight into the dynamics of the problem. We find empirical support for the theoretical predictions that: (1) if a CEO sends high noise performance signals to the board relative to the pool of possible replacements, the probability of turnover will be less sensitive early on in the manager’s tenure and more sensitive later due to the learning process; (2) the probability of turnover for a CEO who has a lower level of initial uncertainty relative to a pool of possible replacements will be less sensitive to performance because the CEO will need to be considered high quality to get the position in the first place; and (3) there is empirical evidence to support the notion that ongoing volatility in the board’s estimate of a manager’s ability plays a role in the updating process of ability assessment by a board. Recent empirical work has indicated that board-induced CEO turnover is a function of industry business cycles and not just relative performance evaluation. The literature notes that this could be because: (1) CEOs may optimally be rewarded or punished for peer group performance if a CEO’s actions affect peer performance; (2) boards receive more, or better information in industry downturns than they do during booms; or (3) boards misattribute industry performance to CEO ability. The literature concludes (3) largely due to the results not being sensitive to CEO tenure, where high tenure CEOs should have proven themselves in good and bad times. There is however no theoretical framework to help interpret these empirical findings and we consider conclusions incomplete. It is well established in the macroeconomic literature that downturns are highly correlated with increased levels of uncertainty, and as a result firm behaviour is impacted. The second study in this thesis presents a model of board-induced CEO turnover that allows analysis under two stochastic state variables: (1) perceived managerial ability; and (2) precision of the perceived ability. We use the constructed model to show that, following shocks that increase uncertainty, the probability of turnover for high tenure CEOs may be higher or lower than low tenure CEOs depending on the board’s estimate of CEO ability. This casts doubt on conclusions made from the findings of the empirical literature. The final study presented by this thesis is my job market paper. It presents a new game of performance-induced CEO turnover that analyses CEO turnover decisions in a context where the CEO and the board both have meaningful options. We show that under certain conditions a CEO has the incentive to lock in a high level of perceived ability, through good firm performance, and exercise their option to leave for other roles and increased prestige. This creates an upper and lower threshold for performance-induced CEO turnover. The lower threshold relates to the board’s option to terminate a low-quality CEO and the upper threshold relates to a high-quality CEO’s option to leave the firm. The upper threshold creates a credible threat for the board that affects its decision making. We define two types of threats: (1) the persistent threat, where the firm is one where the incumbent and any replacement will have an upper threshold; and (2) a unique threat, where only the incumbent has the upper threshold and replacements are taken from a pool of candidates who do not have an upper threshold. We estimate that both threat types have a negative impact on firm value. Empirically we find that consistent with the theory, the probability of a turnover event increases following positive relative accounting performance for small firms and firms with young CEO’s, indicating upper threshold constraints for these two groups.</p>

Do Social Media Matter?

Political experiences on social media—such as being targeted by electoral mobilization, seeing politically supportive messages, and accidentally encountering news—contribute to citizens’ repertoires of political participation. These associations are, on average, stronger for electoral mobilization than for accidental exposure, while exposure to supportive political content lies in between. Political experiences on social media do not disproportionally encourage participation in relatively easier, less resource-intensive activities, nor in activities primarily occurring in digital spaces, but foster hybrid participatory repertoires that combine higher-threshold and lower-threshold endeavors occurring both online and face to face. When placed amid the many different factors that affect participation, political experiences on social media play a distinctive and important role. However, their impact may be weaker than that of long-standing differences in resources and motivations among different groups of citizens.

Performance Enhancement of Opened Resonance Photoacoustic Cells Based on Three Dimensional Topology Optimization

Photoacoustic (PA) spectroscopy techniques enable the detection of trace substances. However, lower threshold detection requirements are increasingly common in practical applications. Thus, we propose a systematic geometry topology optimization approach on a PA cell to enhance the intensity of its detection signal. The model of topology optimization and pressure acoustics in the finite element method was exploited to construct a PA cell and then acquire the optimal structure. In the assessment, a thermo-acoustic model was constructed to properly simulate the frequency response over the range of 0–70 kHz and the temperature field distribution. The simulation results revealed that the acoustic gain of the optimized cell was 2.7 and 1.3 times higher than conventional cells near 25 and 52 kHz, respectively. Moreover, the optimized PA cell achieved a lower threshold detection over a wide frequency range. Ultimately, this study paves a new way for designing and optimizing the geometry of multifarious high-sensitivity PA sensors.

Decreased KATP channel activity contributes to the low glucose threshold for insulin secretion of rat neonatal islets

Transitional hypoglycemia in normal newborns occurs in the first 3 days of life and has clinical features consistent with hyperinsulinism. We found a lower threshold for glucose-stimulated insulin secretion from freshly isolated embryonic day (E)22 rat islets, which persisted into the first postnatal days. The threshold reached the adult level by postnatal day (P)14. Culturing P14 islets also decreased the glucose threshold. Freshly isolated P1 rat islets had a lower threshold for insulin secretion in response to BCH (2-aminobicyclo-(2,2,1)-heptane-2-carboxylic acid), a non-metabolizable leucine analog, and diminished insulin release in response to tolbutamide, an inhibitor of β-cell KATP channels. These findings suggested that decreased KATP channel function could be responsible for the lower glucose threshold for insulin secretion. Single-cell transcriptomic analysis did not reveal a lower expression of KATP subunit genes in E22 compared to P14 β-cells. The investigation of electrophysiological characteristics of dispersed β-cells showed that early neonatal and cultured cells had fewer functional KATP channels per unit membrane area. Our findings suggest that decreased surface density of KATP channels may contribute to the observed differences in glucose threshold for insulin release.

What Information Drives Political Polarization? Comparing the Effects of In-group Praise, Out-group Derogation, and Evidence-based Communications on Polarization

This project differentiates between communication that praises one's political in-group ( in-group praise), attacks the opposition ( out-group derogation), or focuses on policy details ( evidence based), testing their effects on network and attitude polarization. We begin with an agent-based model, which shows that congenial evidence-based exchanges polarize the network and the inclusion of identity-driven communications leads to greater polarization. Once out-group derogation reaches a certain threshold, the network of agents splits into two groups, yet the polarizing effects of in-group praise are yet stronger and emerge more rapidly (i.e., a lower threshold of in-group praise is needed to polarize the network). Using an experimental design on a sample of American partisans, we offer a partial validation of the model. In-group praise and out-group derogation polarize attitudes more than balanced evidence-based news, but not more than congenial evidence-based news. Identity-driven news also has no effects on affective polarization. This multidisciplinary evidence shows that the nature of political content matters.

Viability and thresholds for treatment of extremely preterm infants: survey of UK neonatal professionals

BackgroundDecisions about treatments for extremely preterm infants (EPIs) born in the ‘grey zone’ of viability can be ethically complex. This 2020 survey aimed to determine views of UK neonatal staff about thresholds for treatment of EPIs given a recently revised national Framework for Practice from the British Association of Perinatal Medicine.MethodsThe online survey requested participants indicate the lowest gestation at which they would be willing to offer active treatment and the highest gestation at which they would withhold active treatment of an EPI at parental request (their lower and upper thresholds). Relative risks were used to compare respondents’ views based on profession and neonatal unit designation. Further questions explored respondents’ conceptual understanding of viability.Results336 respondents included 167 consultants, 127 registrars/fellows and 42 advanced neonatal nurse practitioners (ANNPs). Respondents reported a median grey zone for neonatal resuscitation between 22+1 and 24+0 weeks’ gestation. Registrars/fellows were more likely to select a lower threshold at 22+0 weeks compared with consultants (Relative Risk (RR)=1.37 (95% CI 1.07 to 1.74)) and ANNPs (RR=2.68 (95% CI 1.42 to 5.06)). Those working in neonatal intensive care units compared with other units were also more likely to offer active treatment at 22+0 weeks (RR=1.86 (95% CI 1.18 to 2.94)). Most participants understood a fetus/newborn to be ‘viable’ if it was possible to survive, regardless of disability, with medical interventions accessible to the treating team.ConclusionCompared with previous studies, we found a shift in the reported lower threshold for resuscitation in the UK, with greater acceptance of active treatment for infants <23 weeks’ gestation.