Young Firm Manager Turnover and Performance

65 Pages Posted: 29 May 2019

See all articles by Su Wang

Su Wang

London School of Economics & Political Science (LSE)

Date Written: January 3, 2019


This paper investigates the impact of manager turnover on the performance of young firms and examines the variation of this impact across firms with different ownership and control structures. Using a novel manager-shareholder matched dataset of young firms in the UK, I exploit shocks to managers' outside options induced by an area-based policy in support of local businesses. To disentangle the causal impact of manager departures from policy spillover effects, I compare firms with different ex-ante manager departure likelihood and different distance to policy regions. I find that manager departure has a significant negative causal impact on the subsequent performance of young firms. Moreover, manager departure leads to a substantial decline in the assets of founder-managed firms and a significant increase in bankruptcy risks of non-founder-managed firms. My findings suggest that managers have important human capital and that replacement frictions are substantial in young firms. The heterogeneous causal impact supports the existence of founders' private benefi ts of control and their "tight linkages" with firms.

Suggested Citation

Wang, Su, Young Firm Manager Turnover and Performance (January 3, 2019). Available at SSRN: or

Su Wang (Contact Author)

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

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