Management Turnover in Stock Market Winners and Losers: A Clinical Investigation

53 Pages Posted: 2 Dec 2004

See all articles by Gishan Dissanaike

Gishan Dissanaike

University of Cambridge - Judge Business School

Armen Papazian

Fellow, Judge Business School, University of Cambridge; Independent

Date Written: December 2004

Abstract

This paper investigates management turnover among the top and bottom stock market performers of the UK FT500 using clinical methodology. Consistent with previous research, we find that management turnover is higher among poor stock market performers. We identify forced departures through a new and improved method involving a close scrutiny of cases and firms, and find different types of forced departures. While the study finds evidence of management monitoring among poor stock market performers, it also reveals that only 37% of all the forced departures are cases of monitoring. Monitoring seems to occur in far fewer cases than suggested by previous research. However, forced departures may not be the best proxy for management monitoring. The purpose of monitoring is to realign interests, not to fire the manager. Successful management monitoring need not necessarily lead to executive departures.

Keywords: Top Management Turnover, Firm Performance, Forced Departures, Corporate governance, Clinical Research

JEL Classification: G34, G39, M51

Suggested Citation

Dissanaike, Gishan and Papazian, Armen, Management Turnover in Stock Market Winners and Losers: A Clinical Investigation (December 2004). ECGI - Finance Working Paper No. 61/2004. Available at SSRN: https://ssrn.com/abstract=628382 or http://dx.doi.org/10.2139/ssrn.628382

Gishan Dissanaike

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom
+441 223 339626 (Phone)
+441 223 339701 (Fax)

Armen Papazian (Contact Author)

Fellow, Judge Business School, University of Cambridge ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom

Independent ( email )

No Address Available

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