Who Will Survive? A Competing Risks Analysis of Interdependent Top Executive Turnover Events

Abstract

We apply survival analysis to model the tenure and mode of exit of top executives from German stock-market quoted companies between 1999 and 2008. Drawing on both principal-agent and tournament theory, we find evidence that top executives face a higher likelihood of dismissal when firm performance is poor. High firm performance, in contrast, is no predictor of voluntary departures or internal promotions. Moreover, we show that CEOs have a greater risk of dismissal than CFOs, whereas the latter are more likely to leave voluntarily or change internally. Finally, we detect several interdependency effects. While dismissals increase the risk of dismissal for other top executives, routine turnover events increase the likelihood of subsequent internal changes and voluntary departures, regardless of whether the CEO or the CFO leaves first. Our results contribute to managerial succession research by incorporating time as a variable of interest and by considering different types of exit.