Causes, Consequences, and Shareholder Wealth Effects of Management Turnover: A Review of the Empirical Evidence

Furtado, Eugene P.H.; Karan, Vijay

doi:10.2307/3665635

Cited by 137 publications

(77 citation statements)

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“…For example, studies have examined the performance consequences of CEO succession (e.g., Khurana and Nohria 1999), the institutional/symbolic view of CEO succession (e.g., Gamson andScotch 1964, Pfeffer andSalancik 1978), and stock market reactions to CEO turnover (e.g., Furtado and Karan 1990). However, nearly all past studies of CEO succession have focused on large, public companies.…”

Section: Introductionmentioning

confidence: 99%

Founder-CEO Succession and the Paradox of Entrepreneurial Success

Wasserman

2003

Organization Science

412

140

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In the last few decades, we have developed a substantial body of knowledge about CEO succession. However, except for some studies of family businesses that lack direct applicability to nonfamily CEO succession, the past studies of succession have not examined the very first succession event in a firm, when the Founder-CEO is replaced, on a largescale basis. The critical differences between later-stage succession and Founder-CEO succession include the higher level of attachment between Founder-CEOs and the firms they create, the much larger equity holdings of Founder-CEOs (which give them much more control of the firm), the fact that many Founder-CEOs remain in the firm (even though it is being run by their successors), and the fact that nearly all earlystage succession events involve outside successors (in contrast to later-stage succession research, which has focused on the insider-outsider distinction). These differences make it hard to extrapolate from later-stage succession findings to Founder-CEO succession. Therefore, in order to examine Founder-CEO succession, I used field research and grounded theory building to study the factors that should affect Founder-CEO succession in Internet start-ups. I find that there are two central intertemporal events that may affect Founder-CEO succession: The completion of product development and the raising of each round of financing from outside investors. I develop testable hypotheses about how each of these events affect the rate of succession, and then test these hypotheses using an eventhistory analysis of a unique dataset containing the succession histories of 202 Internet firms. My findings point to multiple "paradoxes of success" in which the Founder-CEO's success at achieving critical milestones actually causes the chance of Founder-CEO succession to rise dramatically.

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Section: Introductionmentioning

confidence: 99%

Founder-CEO Succession and the Paradox of Entrepreneurial Success

Wasserman

2003

Organization Science

412

140

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“…CEO transitions represent a major event for most firms and occur when the firm's chief executive retires, resigns or is dismissed (Furtado and Karan, 1990). These transitions are also seen as value increasing events that are either voluntary or involuntary (Neumann and Voetmann, 2005).…”

Section: Ceo Transitions and Impact On Returnsmentioning

confidence: 99%

“…Firm performance, as indicated by accounting and market performance measures, is among the most studied areas of finance, with financial performance linked to a variety of factors including customer satisfaction, corporate diversification, market orientation and human resource management effectiveness. Several researchers have also attempted to establish a definitive link between CEO transition and financial performance (Osborn et al, 1981;Furtado and Karan, 1990;Khurana and Nohria, 2000;). Missing from the body of existing research are studies examining how such transitions impact stock performance of lodging firms, which operate in one of the most important segments of the hospitality and tourism industry.…”

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confidence: 99%

Abnormal Stock Returns and Volume Activity Surrounding Lodging Firms' CEO Transition Announcements

Bloom

Jackson

2016

Tourism Economics

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This research empirically investigates the impact of lodging firms' chief executive officer (CEO) transition announcements on stock performance and trading activity. Specifically, the study utilizes both parametric and non-parametric event study measures to investigate abnormal stock returns and volume activity during the periods surrounding the announcement of CEO transitions at lodging firms. The study finds significant negative abnormal returns in the periods before and after the announcement of a CEO transition. This suggests that the market did not perceive CEO transitions at lodging firms as value-enhancing events. Regarding trading volume, the study finds a decline in trading activity thirty days prior to announcement, but high trading activity during the immediate period surrounding announcements (5 days before the announcement date and 5 days after). This suggests investor uncertainty regarding the direction and value of the stocks of sampled firms. To minimize the negative impact on stock price and trading volume, it is important that lodging firms plan CEO transitions carefully and provide sufficient and timely information to stakeholders about new CEOs, their background and the value they will add to the firm. Such actions could assuage the negative impact of CEO transition announcement on firm value.

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“…According to Furtado and Karen (1990), the research on executive turnover comprises three broad categories: (1) factors contributing to turnover, (2) immediate market reactions to executive turnover events, and (3) subsequent performance post management turnover. Many studies on executive turnover change the focus from poor performance to financial reporting quality.…”

Section: Literature Reviewmentioning

confidence: 99%

Does the Type of Material Information Matter to CEO Turnover?

Wang

2016

AJFA

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Using hand-collected data to obtain the nature of material information, I examine whether and how the likelihood of CEO turnover is associated with material information disclosures. I find the likelihood of CEO turnover increases following different types of material information announcements. Further, I partitioned the sample into the various stages of company life cycle in order to determine whether life cycle stage affects the relationship between the disclosure of material information and CEO turnover. The results show that the disclosure of material information by companies only in maturity and decline is associated with high CEO turnover.

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Causes, Consequences, and Shareholder Wealth Effects of Management Turnover: A Review of the Empirical Evidence

Cited by 137 publications

References 0 publications

Founder-CEO Succession and the Paradox of Entrepreneurial Success

Founder-CEO Succession and the Paradox of Entrepreneurial Success

Abnormal Stock Returns and Volume Activity Surrounding Lodging Firms' CEO Transition Announcements

Does the Type of Material Information Matter to CEO Turnover?

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