CEO Turnovers and Disruptions in Customer-Supplier Relationships

• In Event: Corporate Governance

Abstract

Events that disrupt customer-supplier relationships pose a source of risk for suppliers that depend on a customer for a large portion of their revenues. We identify the replacement of a customer’s CEO as a disruptive event that results in suppliers losing on average $21.2 million in sales. The magnitude of this loss in sales is lower when customers face higher switching costs but greater following more disruptive turnovers and when suppliers make relationship-specific investments. Further, suppliers experience worse overall financial performance following this loss in sales as well as negative abnormal stock returns to announcements of customer CEO departures.

Authors

• Sarah Shaikh, The University of Arizona

• Matthew Serfling, The University of Arizona

• Vincent Intintoli, Southern Illinois University Carbondale