It’s a Matter of Time! CEO Turnover and Corporate Turnarounds in Italy

This paper examines whether CEO turnover affects company performance and the optimal time for CEO renewal during a turnaround process. Results, derived from data collected from Italian companies, highlight the necessity of introducing the new CEO before beginning an insolvency procedure. A later appointment can reduce his/her impact, probably due to the difficulty of managing negotiations with the creditors. Moreover, we show a positive and significant relationship between CEO turnover and the likelihood of a bankrupt firm re-emerging from an insolvency procedure. The analysis was based on the traditional logit model and more modern approaches like the random forest and the AdaBoost models, combined with the SHAP technique. Overall, our findings provide valuable insight for all company stakeholders, whose interests are significantly impacted by its default.