CEO AND DIRECTOR TURNOVER IN FAILING FIRMS - AN ILLUSION OF CHANGE

Firms facing imminent bankruptcy would seemingly be under some pressur e to demonstrate effective governance structures as a means for mainta ining the support of important external constituents and initiating a turnaround. Little is known, however, about CEO and director turnover and its impact on the composition and structure of the board in failin g firms. This study assesses both the incidence and form of governance changes in the 5-year period prior to corporate bankruptcy. Despite e xtensive board member and CEO replacements, changes by firms at immine nt risk of failure do not conform with the prescriptions favored by re form advocates and institutional investors.