Management Turnover and Product Market Competition: Empirical Evidence from the U.S. Newspaper Industry

Abstract

We examine the relationship between management turnover and product market structure in a sample of U.S. newspapers from 50 large cities over the 1950-1993 time period. Examining 6 key managerial positions representing 18,849 observation-years, we find evidence of significantly higher rates of management job turnover in competitive markets compared to monopolistic markets. We find that the sensitivity of turnover probabilities to a newspaper's own performance did not differ significantly between competitive and monopoly markets. Additionally, we find evidence that turnover probabilities increased when a newspaper's competitors exhibited strong performance. Our results are consistent with some theoretical models of the relationship between competition and managerial contracting. In particular, our findings are consistent with the hypothesis that competition generates information that is used by the firm to evaluate its managerial team.

JEL Classification: D21, D40, J44, L20