Performance Changes Following Top Management Dismissals
JOURNAL OF FINANCE, Vol 50 No 4, September 1995
Posted: 4 Aug 1995
We document that forced resignations of top managers are preceded by large and significant declines in operating performance and followed by large improvements in performance. However, forced resignations are rare and are due more often to external factors (e.g. blockholder pressure, takeover attempts, etc.) than to normal board monitoring. Following the management change, these firms significantly downsize their operations and are subject to a high rate of corporate control activity. Normal retirements are followed by small increases in operating income and are also subject to a slightly higher incidence of post-turnover corporate control activity.
JEL Classification: D2
Suggested Citation: Suggested Citation