Turnover Threat and CEO Risk-Taking Behavior in the Banking Industry

In this study we investigate the risk-taking reaction of bank CEOs to turnover threats they anticipate. In contrast with the previous studies (e.g., Chakraborty, Sheikh and Subramanian, 2007), we find a concave relationship between the turnover threat and CEO risk taking in banking industry such that the highest levels of risk taking take place when CEO is faced with medium to high levels of turnover threats. When the turnover threat is imminent, bank CEOs take relatively less risk. We also investigate the impact of independent directors on this relationship and find that the effects of CEO turnover threat on CEO risk-taking behavior concentrates on banks with a more independent board