Top Executive Dismissal, Ownership and Corporate Performance

44 Pages Posted: 26 Mar 2002

See all articles by Annita Florou

Annita Florou

Bocconi University

Martin J. Conyon

Bentley University; Wharton School, Center for Human Resources


This paper evaluates the empirical relationship between top executive turnover and firm performance. Based on a sample of the 460 largest UK listed companies during the period 1990-1998 we establish an inverse and robust statistical relation between the probability of a management change and a firm's performance: top executives are fired for poor performance. This can result from internal monitoring of management by the board or block share holders. Second, the data indicate that only very poor levels of performance affect significantly the turnover likelihood: corporate performance must fall dramatically to force a senior executive job separation. Third, the likelihood of managerial turnover for poor performance has not changed over time: today's senior managers face the same disciplining effects as those senior managers in earlier years. Finally, there seems to be no evidence that managerial stock ownership, measured as the proportion of ordinary shares owned by top managers, enables them to become entrenched.

Keywords: top executive turnover, firm performance, ownership

JEL Classification: G34, G39, L22

Suggested Citation

Florou, Annita and Conyon, Martin J., Top Executive Dismissal, Ownership and Corporate Performance. Available at SSRN: or

Annita Florou (Contact Author)

Bocconi University ( email )

Via Roentgen 1
Milan, 20136


Martin J. Conyon

Bentley University ( email )

175 Forest Street
Waltham, MA 02145
United States

Wharton School, Center for Human Resources ( email )

3600 Locust Walk
Philadelphia, PA 19104-6365
United States

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