The Harvard Law School Forum on Corporate Governance https://corpgov.law.harvard.edu The leading online blog in the fields of corporate governance and financial regulation. Mon, 27 Apr 2026 13:20:01 +0000 en-US hourly 1 https://wordpress.org/?v=6.5.8 https://corpgov.law.harvard.edu/wp-content/uploads/2024/02/cropped-photography-4-e1706898544564-1-32x32.png The Impact of CEO Divorce on Shareholders – The Harvard Law School Forum on Corporate Governance https://corpgov.law.harvard.edu 32 32 The Impact of CEO Divorce on Shareholders https://corpgov.law.harvard.edu/2013/12/03/the-impact-of-ceo-divorce-on-shareholders/?utm_source=rss&utm_medium=rss&utm_campaign=the-impact-of-ceo-divorce-on-shareholders https://corpgov.law.harvard.edu/2013/12/03/the-impact-of-ceo-divorce-on-shareholders/#comments Tue, 03 Dec 2013 14:28:53 +0000 http://blogs.law.harvard.edu/corpgov/?p=56115?d=20141216094010EST Posted by R. Christopher Small, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Tuesday, December 3, 2013
Editor's Note:

The following post comes to us from David Larcker, Professor of Accounting at Stanford University; Allan McCall of the Department of Accounting at Stanford University; and Brian Tayan of the Corporate Governance Research Program at the Stanford Graduate School of Business.

Recent events suggest that shareholders pay attention to matters involving the personal lives of CEOs and take this information into account when making investment decisions. In our paper, Separation Anxiety: The Impact of CEO Divorce on Shareholders, which was recently made publicly available on SSRN, we examine the impact that CEO divorce can have on a corporation.

There are at least three potential ways in which a CEO divorce might impact a corporation and its shareholders. The first is loss of control or influence. A CEO with a significant ownership stake in a company might be forced to sell or transfer a portion of this stake to satisfy the terms of a divorce settlement. This can reduce the influence that he or she has over the organization and impact decisions regarding corporate strategy, asset ownership, and board composition. Shareholder reaction to loss of control will vary, depending on the view that investors have of CEO performance and governance quality. If they view performance and governance quality favorably, they will react negatively to the news; if they view management as entrenched or a poor steward of assets, they will react positively. Shareholder reaction will also depend in part on what happens to divested shares, including whether they are transferred to the spouse, sold in a block to a third-party, or dispersed in the general market. Each of these can shape the future governance of a firm.

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