Management Turnover in Subsidiaries of Conglomerates Versus Standalone Firms
University of South Carolina Working Paper
39 Pages Posted: 8 Jan 2002
Date Written: June 2002
An extensive prior literature documents the sensitivity of CEO turnover to performance. However, little is known about turnover in the firm's internal labor market. We compare the likelihood of turnover following poor performance for a sample of subsidiary managers inside conglomerate firms to the likelihood of turnover of CEOs of comparable stand-alone firms. After controlling for a number of other factors, we find that subsidiary managers have a significantly higher likelihood of turnover following poor performance than CEOs of comparable stand-alone firms.
Keywords: Conglomerate discount, diversification discount, internal labor markets, internal capital markets, management turnover, principal agent, incentive compensation
JEL Classification: G3
Suggested Citation: Suggested Citation