Do banks really monitor? Evidence from CEO succession decisions

Andrew Marshall, Laura McCann, Patrick McColgan* (Corresponding Author)

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

18 Citations (Scopus)
15 Downloads (Pure)


We demonstrate that banks play an important monitoring role in CEO succession that is not observed for other types of lenders, particularly public bondholders. There is a stronger relation between cash flow performance and forced CEO turnover for firms issuing bank debt during the year of CEO turnover than for firms not issuing bank debt, and bank debt issuance increases the likelihood of external CEO succession. The stock price reaction to CEO succession is higher when bank monitoring is prevalent. Our results are consistent with theories of relationship banking that propose a valuable monitoring role for well informed, incentivized bank lenders.
Original languageEnglish
Pages (from-to)118-131
Number of pages14
JournalJournal of Banking and Finance
Early online date29 May 2014
Publication statusPublished - Sept 2014

Bibliographical note

The authors are grateful to Dick Davies, Paul Draper, Robert Faff, David Hillier, Ike Mathur (the editor), Katrin Migliorati, Krishna Paudyal, our anonymous reviewer, and to seminar participants at the 2nd International Conference of the Financial Engineering and Banking Society (London) and 2013 Midwest Finance Association Annual Meeting (Chicago) for helpful comments on earlier versions of this work. We also thank Martin Kemmitt for helpful research assistance on this project. All errors remain our own.


  • bank debt
  • CEO succession
  • lender monitoring
  • external succession


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