Discontinued Operations and Turnover Among Top Executives

26 Pages Posted: 22 Aug 2006

See all articles by John Barron

John Barron

Purdue University - Department of Economics

Dmitriy Chulkov

Indiana University Kokomo - School of Business

Glen R. Waddell

University of Oregon - Department of Economics; Institute for the Study of Labor (IZA)

Date Written: May 30, 2007

Abstract

While previous research has suggested the coincidence of CEO turnover and real changes in firm operations such as discontinued operations, we demonstrate that such findings apply only to specific types of CEO turnover, and only if other top executives also exit the firm. Categorizing specific reasons for CEO departure, the strongest effect is for cases of resignation by the CEO; but this occurs only for CEO resignations that are accompanied by the departure of other top executives. We also find real effects linked to turnover by top executives even if the CEO does not leave. Thus, our analysis highlights the key role of departures of top executives other than the CEO in predicting changes in the direction of the firm. The results are consistent with agency-based theories that consider the turnover behavior of top executives, in particular that top managers may escalate commitment to a project in order to protect reputation.

Keywords: executive, turnover, management team, asymmetric information, discontinued operations

JEL Classification: D82, J3, G3, M5

Suggested Citation

Barron, John M. and Chulkov, Dmitriy and Waddell, Glen R., Discontinued Operations and Turnover Among Top Executives (May 30, 2007). Available at SSRN: https://ssrn.com/abstract=616785 or http://dx.doi.org/10.2139/ssrn.616785

John M. Barron

Purdue University - Department of Economics ( email )

West Lafayette, IN 47907-1310
United States
765-494-4451 (Phone)
765-494-9658 (Fax)

Dmitriy Chulkov

Indiana University Kokomo - School of Business ( email )

2300 S Washington
P.O. Box 9003
Kokomo, IN 46904-9003
United States

Glen R. Waddell (Contact Author)

University of Oregon - Department of Economics ( email )

Eugene, OR 97403
United States
541-346-1259 (Phone)
541-346-1243 (Fax)

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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