An Investigation of relationship between corporate diversification and CEO Turnover: The moderating role of financial distress

Based on agency theory, management may make decisions that are not in line with the interests of shareholders. CEOs may engage in opportunistic activities in order to entrench themselves. There may be severe agency conflicts between managers and stockholders when CEOs diversify their firms. Also, the review of literature suggests that in many cases, corporate diversification destroys firm value. This value destruction is usually considered to be a consequence of managers’ pursuing diversification strategies to benefit themselves. The purpose of this study was to investigate the relationship between corporate diversification and CEO Turnover, given the moderating role of financial distress. In this regard, 126 listed firms in Tehran Stock Exchange have been selected from 1390 to 1395. Logistic regression model based on pooled data has been used to test the hypotheses. The results show that there is a significant and positive relationship between business diversification and CEO Turnover. Also, the results indicate that financial distress moderates the relationship between business diversification and CEO Turnover.