How Boards Use Competitor CEO Awards to Interpret Firm Performance in CEO Dismissal Decisions
Abstract
To what extent do boards integrate external comparative signals when making CEO dismissal decisions? Drawing on the board information processing perspective, we propose that competitor CEO awards shape the weight boards assign to firm financial performance in dismissal evaluations. Specifically, when competitor CEOs receive prestigious recognition, boards are more likely to interpret firm underperformance as evidence of managerial inadequacy, thereby increasing the likelihood of CEO dismissal. In contrast, when firm performance exceeds that of industry peers, competitor awards amplify positive evaluations of the incumbent CEO’s managerial competence, reducing dismissal likelihood. We further identify three governance-related boundary conditions, i.e., CEO compensation structure, board busyness, and board–CEO demographic similarity, that condition these effects by shaping directors’ evaluative expectations, available attentional resources, and relational biases. Using a longitudinal sample of U.S. publicly traded firms from 2006 to 2020, we find consistent support for our theoretical predictions. Our study contributes to the corporate governance literature by demonstrating the extent to which boards embed firm performance evaluations within a broader comparative informational context. In doing so, we also uncover indirect competitive spillover effects of executive recognition, showing that CEO awards influence not only recipients’ outcomes but also governance decisions within rival firms.
Fields of Study & Subjects
Corporate Finance and Governance
Auditing
Earnings Management
Governance
Corporate Social Responsibility Reporting
Publication details
- Journal / source
- Journal of Management
- Publisher
- SAGE Publications
- Publication date
- 24 April 2026
- Language
- EN