This paper aims to examine the events of large changes (revolutions) in management boards and CEO turnover of banks in Central Europe. It explores the association between revolutions in supervisory and management boards of banks operating in two-tier board systems while accounting for the role of shareholder changes and performance.
This study uses a sample of 185 listed and unlisted banks from 11 Central European countries over 15 years. The unique hand-input data for board members and shareholders allows us to study the dynamics of executive turnover in banks, using an OLS regression with various model specifications.
The results show that management board revolutions are more likely in banks that experience revolutions in supervisory boards. Changes in supervisory and management boards occur concurrently, suggesting that concerns regarding board entrenchment may incite shareholders to simultaneously replace executives and non-executives. In addition, a change of the primary shareholder strengthens the positive association between revolutions in the two boards. Finally, the probability of CEO turnover is higher in banks experiencing a change of the supervisory board chair, highlighting the special relation between the two positions.
This study contributes to the literature on executive turnover and the role of changes in supervisory boards in banks, which has been limited to date. Moreover, existing work has primarily explored developed countries and focused on CEO turnover in listed banks with one-tier boards. This paper examines both CEO and executive director turnover in two-tier board systems of listed and unlisted banks operating in emerging countries over a long time period.
