Management turnover across the corporate hierarchy

The Impact of CEO Turnover on Property–Liability Insurer Performance

“…Consistent with this hypothesis, they find that abnormal stock price performance has a negative impact on the probability of CEO turnover in subsequent years. Fee and Hadlock (2004) report similar findings for both CEO turnover and the turnover of top five executives, although “the independent role of firm performance in explaining non‐CEO departures is weak, and in some cases, insignificant.” The study by Warner, Watts, and Wruck (1988) lends further support to Coughlan and Schmidt by providing additional evidence on the inverse relation between stock price performance and the probability of subsequent top management change. However, Warner, Watts, and Wruck conclude that the probability of top management change is not high and much about the event is unexplained, calling for further study with alternative measures of firm performance such as accounting earnings.…”

“…Another critically important question, which has received relatively less attention to this point, is how CEO turnovers affect future firm performance 1 . Since CEO changes often occur as the result of poor firm performance (Coughlan and Schmidt, 1985; Warner, Watts, and Wruck, 1988; Weisbach, 1988; Fee and Hadlock, 2004), it is critically important to understand whether such changes actually result in improved future performance.…”

Monitoring Managers: Does It Matter?

“…The same is true when we include industry-year effects (instead of separate industry and year indicators) to capture possible industry trends; these too are not statistically significant (p = 0.234; see column 4). 16 For related findings, see Coughlan and Schmidt (1985), Warner, Watts, and Wruck (1988), Weisbach (1988), Kim (1996), and Fee and Hadlock (2004), who relate CEO turnover to prior-year economic effects, CEO turnover appears much more sensitive to the board's soft information than to hard information in the form of past performance. 17 To see if soft and hard information capture distinct signals, column 5 asks whether CEO turnover is sensitive to soft information about CEO competence even among firms that evidently perform well according to the hard information.…”

The Executive Turnover Risk Premium

“…Previous work shows that CEOs bear significant costs when getting fired, and so the existence of a turnover risk premium in CEO pay is not surprising per se. Empirical studies indicate that CEOs may remain unemployed for extended periods of time, and, when they find a new job, they typically work for much smaller firms and earn significantly less than in their prior job (Fee and Hadlock (2004)). 2 But is variation in turnover risk causally related to compensation?…”