Does a CEO turnover lead to a CFO turnover? Evidence from voluntary and forced turnover

The role of CFO has become increasingly important since the enactment of SOX 2002. The existing literature suggests that CFOs tend to leave office within 6 to 12 months of a CEO’s departure, but studies addressing whether forced and voluntary turnover behave differently are unexplored. There is also no attempt to explore whether financial performance or institutional shareholding play moderating roles in mitigating successive CFO and CEO turnovers. We find that forced (voluntary) CEO turnover has a higher significant marginal effect on forced (voluntary) CFO turnover. We also find that, in general, higher financial performance and institutional ownership play significant moderating roles in the relationship between CEO turnover and CFO turnover. Our study indicates a strong disciplinary mechanism by the board due to its intention to signal that it is concerned about the firm's reputation. The voluntary turnover of a CFO as a result of a voluntary turnover of a CEO also indicates that a CFO considers their position to survive reputational damage.