IDEAS home Printed from https://ideas.repec.org/a/wly/mgtdec/v26y2005i1p25-37.html
   My bibliography  Save this article

Top executive turnovers: Separating decision and control rights

Author

Listed:
  • Robert Neumann

    (Danske Markets, Danske Bank, Holmens Kanal 2-12, 1092 Copenhagen K, Denmark)

  • Torben Voetmann

    (Cornerstone Research and Finance Department, The Wharton School, 3620 Locust Walk, Steinberg Hall-Dietrich Hall, Suite 2344, Philadelphia, PA 19104-6367, USA)

Abstract

This paper examines the relationship between performance and top executive turnovers using a sample of 81 turnovers and matching companies listed on the Copenhagen Stock Exchange. We find that poor market performance increases the probability of management replacements and that forced layoffs are value-increasing events while voluntary resignations are value-decreasing events. Large shareholders as active monitors, or part of corporate control, are not exhibited in the results. If large shareholders have any influence on CEO turnovers it is not revealed in our data. Indeed, separating control rights from decision rights does not appear to affect managerial turnovers. Copyright © 2004 John Wiley & Sons, Ltd.

Suggested Citation

  • Robert Neumann & Torben Voetmann, 2005. "Top executive turnovers: Separating decision and control rights," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 26(1), pages 25-37.
    • Handle: RePEc:wly:mgtdec:v:26:y:2005:i:1:p:25-37
    DOI: 10.1002/mde.1187
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1002/mde.1187
    File Function: Link to full text; subscription required
    Download Restriction: no
    File URL: https://libkey.io/10.1002/mde.1187?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Paul Asquith & Robert Gertner & David Scharfstein, 1991. "Anatomy of Financial Distress: An Examination of Junk-Bond Issuers," NBER Working Papers 3942, National Bureau of Economic Research, Inc.
    2. Denis, David J. & Denis, Diane K. & Sarin, Atulya, 1997. "Ownership structure and top executive turnover," Journal of Financial Economics, Elsevier, vol. 45(2), pages 193-221, August.
    3. Lausten, M., 1998. "CEO Turnover, Firm Performance and Corporate Governance," Papers 98-10, Aarhus School of Business - Department of Economics.
    4. Warner, Jerold B. & Watts, Ross L. & Wruck, Karen H., 1988. "Stock prices and top management changes," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 461-492, January.
    5. Lausten, Mette, 2002. "CEO turnover, firm performance and corporate governance: empirical evidence on Danish firms," International Journal of Industrial Organization, Elsevier, vol. 20(3), pages 391-414, March.
    6. Mark R. Huson & Robert Parrino & Laura T. Starks, 2001. "Internal Monitoring Mechanisms and CEO Turnover: A Long‐Term Perspective," Journal of Finance, American Finance Association, vol. 56(6), pages 2265-2297, December.
    7. Paul Asquith & Robert Gertner & David Scharfstein, 1994. "Anatomy of Financial Distress: An Examination of Junk-Bond Issuers," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(3), pages 625-658.
    8. Brickley, James A. & Coles, Jeffrey L. & Jarrell, Gregg, 1997. "Leadership structure: Separating the CEO and Chairman of the Board," Journal of Corporate Finance, Elsevier, vol. 3(3), pages 189-220, June.
    9. Mikkelson, Wayne H. & Partch, M. Megan, 1997. "The decline of takeovers and disciplinary managerial turnover," Journal of Financial Economics, Elsevier, vol. 44(2), pages 205-228, May.
    10. DeAngelo, Harry & DeAngelo, Linda, 1989. "Proxy contests and the governance of publicly held corporations," Journal of Financial Economics, Elsevier, vol. 23(1), pages 29-59, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Turner, Elizabeth H. & Pacheco-Paredes, Arturo & Wheatley, Clark, 2024. "Transfer of knowledge: Do trade surpluses foster quality in accounting practices?," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 436-451.
    2. Fan, Dennis K.K. & Lau, Chung-Ming & Young, Michael, 2007. "Is China's corporate governance beginning to come of age? The case of CEO turnover," Pacific-Basin Finance Journal, Elsevier, vol. 15(2), pages 105-120, April.
    3. Kato, Takao & Long, Cheryl, 2006. "CEO Turnover, Firm Performance and Enterprise Reform in China: Evidence from New Micro Data," IZA Discussion Papers 1914, Institute of Labor Economics (IZA).
    4. Jiaying Fan & Kai Wang & Lidong Wu, 2023. "Monitoring the Type I Agency Problem or the Type II Agency Problem? Directors Appointed by Non-State Shareholders and the CEO Turnover–Performance Sensitivity," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 59(7), pages 2160-2189, May.
    5. Kato, Takao & Long, Cheryl, 2006. "CEO turnover, firm performance, and enterprise reform in China: Evidence from micro data," Journal of Comparative Economics, Elsevier, vol. 34(4), pages 796-817, December.
    6. Barry A.N. Bloom & Leonard A. Jackson, 2016. "Abnormal Stock Returns and Volume Activity Surrounding Lodging Firms' CEO Transition Announcements," Tourism Economics, , vol. 22(1), pages 141-161, February.
    7. Kind, Axel & Schläpfer, Yves, 2011. "Are forced CEO turnovers good or bad news?," Working papers 2011/10, Faculty of Business and Economics - University of Basel.
    8. Leonard A. Jackson, 2014. "CEO Resignations and New and Relevant Information Conveyance: Evidence from the Hospitality Industry," Tourism Economics, , vol. 20(3), pages 567-578, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Huang, Sheng & Maharjan, Johan & Thakor, Anjan V., 2020. "Disagreement-induced CEO turnover," Journal of Financial Intermediation, Elsevier, vol. 43(C).
    2. Dirk Jenter & Fadi Kanaan, 2015. "CEO Turnover and Relative Performance Evaluation," Journal of Finance, American Finance Association, vol. 70(5), pages 2155-2184, October.
    3. Wen-Hsien Tsai & Yi-Chen Kuo & Jung-Hua Hung, 2009. "Corporate diversification and CEO turnover in family businesses: self-entrenchment or risk reduction?," Small Business Economics, Springer, vol. 32(1), pages 57-76, January.
    4. Zuriadah Ismail & Noor Lela Ahmad & Norlia Mat Norwani & Mohd Nazir bin Md Zabit, 2019. "Incentive Effects of Granting Equity-Based Payment on Reducing Top Executive Turnover," Research in World Economy, Research in World Economy, Sciedu Press, vol. 10(5), pages 157-166, December.
    5. Hideaki Miyajima & Ryo Ogawa & Takuji Saito, 2016. "Changes in the Corporate Governance System and Presidential Turnover," Working Papers halshs-01680409, HAL.
    6. Nadide BANU OLCAY GÜNER, 2023. "Incentivizing CEOs via pay and forced turnover: Do tenure and managerial ability matter?," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(1(634), S), pages 37-66, Spring.
    7. Dah, Mustafa A. & Frye, Melissa B., 2017. "Is board compensation excessive?," Journal of Corporate Finance, Elsevier, vol. 45(C), pages 566-585.
    8. Renee B. Adams & Benjamin E. Hermalin & Michael S. Weisbach, 2010. "The Role of Boards of Directors in Corporate Governance: A Conceptual Framework and Survey," Journal of Economic Literature, American Economic Association, vol. 48(1), pages 58-107, March.
    9. Shijun Cheng & John Evans & Nandu Nagarajan, 2008. "Board size and firm performance: the moderating effects of the market for corporate control," Review of Quantitative Finance and Accounting, Springer, vol. 31(2), pages 121-145, August.
    10. Kevin J. Murphy & Jan Zabojnik, 2006. "Managerial Capital And The Market For Ceos," Working Paper 1110, Economics Department, Queen's University.
    11. Kang, Jun-Koo & Luo, Juan & Na, Hyun Seung, 2018. "Are institutional investors with multiple blockholdings effective monitors?," Journal of Financial Economics, Elsevier, vol. 128(3), pages 576-602.
    12. David Hillier & Patrick McColgan, 2009. "Firm Performance and Managerial Succession in Family Managed Firms," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 36(3-4), pages 461-484.
    13. Balsam, Steven & Miharjo, Setiyono, 2007. "The effect of equity compensation on voluntary executive turnover," Journal of Accounting and Economics, Elsevier, vol. 43(1), pages 95-119, March.
    14. Quoc Trung Tran & Xuan Minh Nguyen & Tien Hoang Nguyen, 2016. "CEO duality, state shareholder and CEO turnover: Evidence from Vietnamese stock market," Business and Economic Horizons (BEH), Prague Development Center, vol. 12(3), pages 113-120, September.
    15. Weisbach, Michael S., 1995. "CEO turnover and the firm's investment decisions," Journal of Financial Economics, Elsevier, vol. 37(2), pages 159-188, February.
    16. Ricardo N. Bebczuk & André L. Carvalhal da Silva & Alberto E. Chong & Juan José Cruces & Urbi Garay & Maximiliano González & Luis H. Gutiérrez & Enrique Kawamura & Ricardo P. C. Leal & Fernando Lefort, 2007. "Investor Protection and Corporate Governance: Firm-level Evidence across Latin America," IDB Publications (Books), Inter-American Development Bank, number 59598 edited by Alberto E. Chong & Florencio López-de-Silanes, February.
    17. Muravyev, Alexander & Bilyk, Olga & Grechaniuk, Bogdana, 2009. "Firm Performance and Managerial Turnover: The Case of Ukraine," MPRA Paper 13685, University Library of Munich, Germany.
    18. Zhao, Hong, 2018. "Executive labor market segmentation: How local market density affects incentives and performance," Journal of Corporate Finance, Elsevier, vol. 50(C), pages 1-21.
    19. Giorgio Brunello & Clara Graziano & Bruno Parigi, 1999. "Ownership or Performance: What Determines Board of Directors' Turnover in Italy?," Working Papers 1999.30, Fondazione Eni Enrico Mattei.
    20. Pessarossi, Pierre & Weill, Laurent, 2013. "Does CEO turnover matter in China? Evidence from the stock market," Journal of Economics and Business, Elsevier, vol. 70(C), pages 27-42.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:mgtdec:v:26:y:2005:i:1:p:25-37. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www3.interscience.wiley.com/cgi-bin/jhome/7976 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.