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Boards Benefit From Dismissing CEOs Early: Study

Law360 (May 1, 2007, 12:00 AM EDT) -- Companies that dismiss poorly performing CEOs earlier rather than later are less likely to go bankrupt or be delisted from stock exchanges, according to a new study.

The study, which analyzed 430 firms that let their CEOs go between 1996 and 2003, disclosed that markets react negatively to early dismissals. It’s still worth it, however, because late CEO dismissals lead to larger and more permanent damages in shareholder value, according to the study.

“CEO dismissal decisions that come too late, i.e. after shareholders’ equity in the...
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