CEO turnover and bankruptcy: the effects of CEO replacement on bankruptcy reemergence

Does CEO turnover before or during bankruptcy proceedings increase a firm's chances for bankruptcy reemergence? Whereas scholars have emphasized that CEOs are critical to improving organizational performance and effectiveness, prior turnaround studies on CEO turnover have neglected the dynamics of managerial discretion during the period prior to filing and the period under bankruptcy protection. In this study, we highlight the differences between both periods to theorize about how CEO turnover will affect a bankrupt firm's likelihood of bankruptcy emergence. Emphasizing the distinctiveness of the two periods, we further hypothesize that performance severity will have opposing moderating effects on the relationship between CEO turnover and firm emergence depending on the period in which the CEO turnover occurred. Based on a sample of 345 U.S. firms that filed for bankruptcy between the years 1992 and 2019, we find empirical support for our arguments.