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Authors:John M.Barron,Dmitriy V.Chulkov,Glen R.Waddell一乙,C

Top management team turnover, CEO succession type, and strategic change

Journal of Business Research 64 (2011) 904–910


Keywords: Executive turnover, Top management teams, Strategic change, Discontinued operations, Power circulation theory

关键词:高管人员流动 最高管理团队 战略变革 停止运营 权力循环理论

Abstract:While previous research suggests that CEO turnover correlates with strategic changes in firm#39;s operations such as discontinuation of operations, we demonstrate that such findings apply only to specific types of CEO turnover, and only if non-CEO members of the top management team also exit the firm. Our analysis examines cases of contender, follower, and outsider succession and reinforces the key role of non-CEO departures in strategic change at a firm. The results support an integration of the upper echelons perspective and the power circulation theory view of top management team turnover.


1. 介绍

Research on top management teams (TMTs) recognizes that senior executives rarely work alone. The upper echelons perspective (Hambrick and Mason, 1984) argues that collective characteristics and actions of the TMT may affect organizational outcomes. However, studies of executive turnover in economics and finance typically pay exclusive attention to the CEO and firm performance measures (e.g. Murphy and Zimmerman, 1993; Warner et al., 1988; Pourciau, 1993; Huson et al., 2004). Less research in this literature focuses on strategic changes at the firm coinciding with CEO turnover. In one example, Weisbach (1995) explores the extent to which CEO turnover correlates with the divestitures of recently acquired divisions and concludes that the probability of exiting a line of business and divesting unsuccessful acquisitions is significantly higher with the dismissal of the CEO responsible for the acquisition.

In order to complement the research on strategic changes at the time of top management turnover, our analysis exploits a large representative dataset that allows us to better identify the specific types of CEO turnover that correlate with changes at the firm, including joint turnover of the CEO and non-CEO members of the TMT. We use the accounting disclosure of discontinued operations – exiting a line of business – as a measure of strategic change in firm operations. Such a variable has been used previously in studies of escalation in managerial decisions (Statman and Sepe, 1989) and is similar in flavor to the variable considered by Weisbach (1995). Our analysis helps reveal a more focused relationship than has been previously documented.



Shen and Cannella (2002) adapt the power circulation theory of control (Ocasio, 1994; Ocasio and Kim, 1999) to the discussion of TMT turnover. In this view, there are three distinct types of CEO turnover — outsider succession, follower succession that includes insider CEO replacement appointed after a retirement of the outgoing CEO, and contender succession that includes insider successors appointed after the resignation of the outgoing CEO. Shen and Cannella demonstrate that these three types of succession have different effects on the subsequent operational performance of the firm. We complement this strand of research by exploring a more precise measure of strategic change in the operations of firms affected by the three types of CEO succession. We also integrate the three types of turnover suggested by Shen and Cannella with the upper echelons perspective by examining TMT turnover scenarios at the time of CEO succession. Our analysis leads to three significant findings.

Our first finding is that CEO departure from the firm is associated with reporting of discontinued operations only if other top executives also exit the firm. Note that limiting the analysis to only cases of CEO turnover was common in earlier empirical studies in the finance and economics literature (e.g. Weisbach, 1995; Huson et al., 2004). We replicate the basic finding of Weisbach that CEO turnover is correlated with changes in the firm#39;s operations. In further analysis, we allow estimates to differ in cases of joint turnover by the CEO and other top managers and in cases when the CEO leaves alone. Doing so demonstrates that the basic result reflects a large and significant link between discontinued operations and CEO departures that also involve departures of other TMT members. This finding supports the upper echelons perspective and questions the merit of theorizing about the events surrounding CEO turnover separately from those that relate to the turnover of other members of the TMT.





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