Rice U. business professor available to comment on Pfizer’s CEO dismissal

CONTACT: Jessica Stark
PHONE: 713-348-6777
EMAIL: stark@rice.edu

Rice U. business professor available to comment on Pfizer’s CEO dismissal
Investment analyst downgrade could have influenced board’s decision

The unexpected news that Pfizer Inc. replaced its CEO and chairman Jeffrey Kindler after almost five years didn’t come as a surprise to Rice University’s Anthea Zhang, whose recent study found that investment analysts influence a board’s decision to dismiss its CEO.

In the study, Zhang found that negative stock recommendations (lower levels of average analyst ratings, downgrading of the stock and a larger percentage of sell recommendations) resulted in a higher probability of a board dismissing its CEO. The impact of negative stock recommendations was particularly strong when the firm’s prior stock return was relatively low compared with that of its industry peers.

Zhang provided the following commentary for attribution in news reports:

“In the most recent analyst rating Nov. 3, Argus downgraded Pfizer from ‘buy’ to ‘hold’ and about a month later, the CEO is dismissed,” said Zhang, an associate professor of management in Rice’s Jones Graduate School of Business. “It’s consistent with our findings that investment analysts and their negative stock ratings can sway a board.

“The cause and effect makes sense: Investment analysts’ stock recommendations are consequential to investors’ decisions. Given that a public company is dependent upon the financial markets for access to capital, the board is likely to be aware of and respond to analyst recommendations when they are negative.”

Zhang is the Jones School Distinguished Associate Professor of Management at Rice University. Her recent study on the investment analyst influence on CEO dismissal was accepted for publication in the Strategic Management Journal. A summary of the study is available at http://www.media.rice.edu/media/NewsBot.asp?MODE=VIEW&ID=14817.

 To interview Zhang or request a PDF of the study for news purposes, contact Jessica Stark, assistant director of media relations, at stark@rice.edu or 713-348-6777.