Performance Changes Following Top Management Dismissals

Abstract:     
We examine the performance of firms experiencing a top management change over the period 1985-1988. Forced resignations are preceded by large and significant declines in operating performance and followed by large improvements in performance. However, forced resignations are rare and are due more often to external factors (eg. blockholder pressure, takeover attempts, etc.) than to normal board monitoring. Following the management change these firms significantly downsize their operations and are subject to a high rate of corporate control activity. Normal retirements are followed by small increases in operating income and are also subject to a slightly higher than normal incidence of corporate control activity following the management change.

JEL Classification: G34

working papers series