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Corporate governance and chief executive officer dismissal following poor performance: Australian evidence


  • The authors are grateful for useful comments and feedback from the two anonymous referees, Peter Clarkson, Neil Fargher, Jennifer Francis, Allan Hodgson, Peter Wells, participants at the 2005 Summer Research School in Accounting at the University of Technology, Sydney, the Asian Academic Accounting Association Conference, Kuala Lumpur, 2005, the University of Southern Queensland Faculty of Business Research Seminar, 2006, the Macquarie University Accounting and Finance Research Seminar, 2006, and the Accounting and Finance Association of Australia and New Zealand Conference, Wellington, 2006. All remaining errors are our own. The supply of data by Securities Industry Research Centre of Asia–Pacific on behalf of the Australian Securities Exchange is also gratefully acknowledged.


This paper investigates the association between corporate performance and the probability of chief executive officer (CEO) dismissal for large corporations in Australia. Consistent with prior US and UK studies, corporate performance is negatively related to the probability of CEO dismissal, using both accounting and market-based performance measures. This paper also investigates whether key corporate governance characteristics affect the likelihood of CEO dismissal, by examining their effect on the strength of the negative association between corporate performance and CEO dismissal. The only significant variable is size of the board. Although its effect is opposite to that hypothesized, this paper provides a plausible explanation. Overall, the results are consistent with shareholder wealth considerations dominating board behaviour in Australia.

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