Executive Turnover and the Legal Environment: The Case of California Hospitals, 1960–1995

Abstract

Examinations of executive turnover have analyzed whether poor organizational performance predicts changing leadership. However, few have examined environmental factors affecting turnover. Applying event history analysis to a random sample of California hospitals, we find that poor performance prompts executive turnover and that the legal environment impacts turnover in three ways. First, the legal form of hospitals shapes evaluation and replacement of executives. Second, a shift in the legal definition of not-for-profit hospitals affects turnover. Finally, turnover increases when hospitals change from for-profit to not-for-profit and vice versa. These findings persist in the presence of numerous control variables.