The Role of Boards’ Misperceptions in the Relation Between Managerial Turnover and Performance: Evidence From European Football
UZH Business Working Paper Series, No. 380
25 Pages Posted: 19 Jan 2019 Last revised: 13 Feb 2019
Date Written: January 9, 2019
In this paper, we account for boards' misperceptions when replacing a top manager by differentiating between managerial turnovers following actual poor performance and managerial turnovers following seemingly poor performance due to bad luck in order to investigate their subsequent effects on performance. We focus on managerial changes within football organizations and analyze dismissals from the top European leagues. To account for the mean reversion of performance, we create a control group of non-dismissals using the nearest neighbor approach. To account for boards' misperceptions, we differentiate between dismissals and non-dismissals that occur either due to poor playing performance on the pitch or due to a sequence of bad luck, which is measured using "expected goals". We find that dismissals after poor playing performance on the pitch increase subsequent performance, while dismissals after a series of bad luck do not. Our results have important implications regarding the design of future turnover studies and the costs of boards' ineffective turnover decisions.
Keywords: Managerial Turnover, Performance, Football
JEL Classification: J44, L83
Suggested Citation: Suggested Citation