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CEO Turnovers and Disruptions in Customer–Supplier Relationships

Published online by Cambridge University Press:  27 December 2017

Vincent J. Intintoli ,
Matthew Serfling  and
Sarah Shaikh
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Abstract

Events that disrupt customer–supplier relationships pose a source of risk for suppliers that depend on a customer for a large portion of their revenues. We identify the replacement of a customer’s chief executive officer (CEO) as a disruptive event that results in suppliers losing substantial sales. These losses are greater when an incumbent customer CEO is more likely to be entrenched and stem largely from the successor divesting assets. Finally, we document that losses in sales following a customer CEO turnover lead to declines in a supplier’s financial performance and that suppliers experience negative abnormal stock returns to announcements of customer CEO departures.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 52 , Issue 6 , December 2017 , pp. 2565 - 2610
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2017 

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Footnotes

1

We thank Jarrad Harford (the editor) and an anonymous referee for their helpful comments and guidance. We are grateful for useful discussions and helpful comments from Sandy Klasa. We also appreciate the helpful comments from Laura Cardella, Dan Dhaliwal, Douglas Fairhurst, Jason Greene, Kathy Kahle, Phil Lamoreaux, Paul Michas, George Papadakis (discussant), David Rakowski, Kartik Raman (discussant), Jayanthi Sunder, Clare Wang (discussant), Ryan Williams, Wanli Zhao, seminar participants at Southern Illinois University Carbondale and the University of Arizona, and conference participants at the 2013 American Accounting Association (AAA) annual meeting, the 2013 Southern Finance Association (SFA) annual meeting, and the 2014 American Accounting Association Financial Accounting and Reporting Section (FARS) midyear meeting. An earlier version of this paper was titled “The Negative Spillover Effects of CEO Turnovers: Evidence from Firm–Supplier Relationships.”

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