Managerial Succession and Organizational Performance

Abstract

It has been widely studied how organizational performance changes after the replacement of the responsible manager. However, there is little evidence how changes in the business environment interact with the efficiency on management replacements. In this paper, I explicitly consider the effect of a change in the environment of organizations on post-replacement effects with regard to organizational performance. Analyzing the performance effect of coach replacements in the German Soccer League prior and after the introduction of the 3-points-rule I find that the magnitude of the performance effect of coach replacements depends on the reward scheme applied in soccer matches. The empirical analysis of the paper confirms predictions from the theoretical model: coach replacements have more favorable effects on team performance under the 3-points-rule than under the 2-points-rule.

Keywords: management turn-over, managerial succession, treatment regression, soccer

JEL Classification: J44, J63, M59, Z00