Top Executive Turnover Research Articles

Can digital transformation reduce R&D investment disruption during the top executive transition period?

AbstractThis study examines whether digital transformation can reduce research and development (R&D) investment disruption during the top executive transition period. Using panel data of A‐listed firms in China from 2007 to 2021, we find that top executive turnover (TET) generally leads to a remarkable reduction in R&D investment, while digital transformation can significantly mitigate the negative impact of TET on R&D investment. Moreover, the smooth management transition effect of digital transformation is more pronounced for firms with outside succession and high organizational complexity. We further divide R&D investments into exploratory and exploitative R&D investments. Compared to exploitative R&D investment, exploratory R&D investment is more adversely affected by TET, and digital transformation has a positive moderating effect on the relationship between them. Our findings suggest that digital transformation enables companies to maintain continuous R&D investment during the top executive transition by improving communication efficiency and enhancing organizational learning.

Top Executive Turnover and Loan Loss Provisions: Evidence from Japanese Regional Banks

Top Executive Turnover and Loan Loss Provisions: Evidence from Japanese Regional Banks

Innovation effects of academic executives: Evidence from China

Since the 1980s, policy reforms have been undertaken in China to gradually promote entrepreneurship of academic researchers. Based on manually collected data on academic executives (defined as either chairperson of the board or CEO, who had an academic title), we investigate the effects of academic executives on corporate technological capabilities and innovation performance among Chinese listed manufacturing firms from 2001 to 2015. Our results demonstrate that firms with academic executives are more likely to implement technological advancement strategies by increasing firm basic research, collaborating with outside institutions, and providing incentives to knowledge workers. Consequently, they have enhanced technological capabilities, as well as a higher quantity and quality of innovation output. In addition, firms with academic executives are more likely to have better financial performance regarding sales and profitability and keep a higher proportion of profits inside the firm to reinvest. The identification of the causal effects of academic executives relies on top executive turnover within firms and the propensity score matching strategy. Further analysis demonstrates that the effects of academic executives are more pronounced when they have a higher academic title, administrative experience, and a specialization in sciences. Our findings suggest that promoting entrepreneurship of academic researchers is an effective way of diffusing and utilizing knowledge, and it provides an internal driving force for the enhancement of corporate technological capabilities, which is crucial for technological catch-up of firms in latecomer countries.

Financial controller turnover: An early warning sign of deteriorating financial reporting quality

AbstractThis study examines the relation between financial controller turnover and public firms’ financial reporting quality. Exploiting a special institutional setting in China, where financial controllers along with CEOs and CFOs are required to attest to the accuracy and completeness of firms’ annual reports, we find that: (a) financial controller turnover is negatively associated with financial reporting quality, (b) the negative relation between financial controller turnover and financial reporting quality is more pronounced in non‐state‐owned enterprises, in firms with weaker corporate governance, and in areas with higher regulatory enforcement intensity, and (c) financial controller turnover is not related to real earnings management. Further analyses show that financial controller turnover is associated with the incidence of subsequent financial report restatements and enforcement actions by the China Securities Regulatory Commission (CSRC). Financial controller turnover also precedes top executive turnover and can be viewed as an early warning sign of deteriorating financial reporting quality. Such information content is incremental to that of top executive turnover. Our analyses also show that firms with financial controller turnover have higher initial stock returns but underperform their counterparts in the long run.

The Role of Deferred Equity Pay in Retaining Managerial Talent*

ABSTRACTWe examine the extent to which deferred vesting of stock and option grants (deferred pay) helps firms retain executives. To the extent an executive forfeits all deferred pay if they leave the firm, deferred vesting will increase the cost (to the executive) of an early exit. The impact of deferred pay on executive retention, a key ingredient for firms to create shareholder value is hence an important empirical issue. Using pay duration proposed in Gopalan et al. (2014) as a measure of the extent of deferred equity, we find that CEOs and non‐CEO executives with longer pay duration are less likely to leave the firm voluntarily. The talent retention role of deferred pay is mitigated by performance‐vesting provisions and signing bonuses offered by industry peers. Moreover, we also find that voluntary turnover is less sensitive to pay duration for executives who are perceived to be more talented and have more firm‐specific skills. Overall, our study highlights a strong link between compensation design and turnover of top executives. It suggests that firms take into account the need for retaining managerial talent in designing executive compensation.

Valuing at the top: CEO diversity-valuing behavior, executive psychological safety, and turnover

In this study, we focus on the role that CEO diversity-valuing behavior plays in shaping top executive turnover. We examine executive psychological safety as a key intervening mechanism. Further, we propose that the negative effect of CEO diversity-valuing behavior will be stronger for female executives. We test and find support for our theory and hypotheses using survey data from a sample of top executives in the largest 1,000 firms in the U.S. Our findings show that executive psychological safety mediates the effect of perceived CEO diversity-valuing behavior on executive turnover and that the negative indirect effect is stronger for female executives. Our study contributes to the upper echelons and diversity literatures by examining the impact of CEO diversity-valuing behavior on executive psychological safety and turnover.

Impact of top executive turnover on firms’ R&D investment: evidence from China

ABSTRACT Though top executive turnover’s economic consequence is highlighted in earlier studies, its link with innovation behaviour has remained relatively underexplored. This study aims to fill this gap through investigating whether, and if so, how, top executive turnover event influences firms’ R&D investment. Based on a sample of 2,810 A-share listed companies in China for the period 2008–2016, our results suggest that top executive turnover is negatively related to enterprises’ R&D investment. This is mainly because top executive turnover increases the departure rate of R&D personnel, which worsens enterprises’ internal R&D environment. The findings also indicate that the negative effect of top executive turnover on R&D investment is accentuated for family enterprises and non-state-owned corporations. Our results have implications for the literature on top executive turnover and enterprises’ innovation behaviour and can inform practice, particularly with respect to the selection of top management team members.

Incentive Effects of Granting Equity-Based Payment on Reducing Top Executive Turnover

The main focus of the study is to examine the incentive effect of granting equity-based payments for reducing turnover among the executives. In specific, the study was guided on determining the influencing effects of managerial ownership and equity-based payment may reduce executive turnover among the Malaysian Listed companies. From the analysis, the main finding shows that firms with equity-based programme with a presence of family control indicates that turnover is likely to be a lower. This implies that family ties play a significant role for removing of inefficient executives. And, where the family members are also served as the board members, the likelihood to shield from being removed is consistent with the management entrenchment hypothesis. Then, extended examination results for the mix pay components of cash and equity reveal the turnover is found to produce less incentive for executives to stay in the firm. The result implies that executives are willing to lose their equity benefits from unexercised value of shares equity and nd the firms fail to restrain executives’ departure as the findings documented in past studies.

Go your own way: Exploring the causes of top executive turnover

Research SummaryWhy do top executives leave their firms? Research on executive turnover has either focused on CEO dismissal or on group‐level top management team (TMT) departure rates, mostly ignoring individual‐level factors that would predict why non‐CEO executives exit. Here, we extend the shock perspective of the unfolding model of turnover used in organizational behavior research to show how relational and reputational shocks influence turnover at the executive level. Our sample includes over 4,000 executives from S&P 1500 firms over 11 years. We hypothesize and find that relational and reputational shocks increase the likelihood of top executive exit. We also consider the moderating influence of pay disparity on these relationships, which impacts how each type of shock influences executive turnover.Managerial SummaryReplacing top executives can be extremely costly for firms. Consequently, understanding the reasons behind top executive exit are important. We examine the effect of different types of shock on the likelihood a top executive will exit their firm. We find that both relational shocks (e.g., other members of the TMT leaving), as well as reputational shocks (e.g., litigation or shareholder activism against the firm), increase turnover. However, we find that higher status executives experience these shocks differently than lower status executives.

Leaving the Senior Civil Service – public service bargain and beyond: The case of Estonia

The article explores why apolitical public sector managers decide to or are forced to leave the civil service in the example of the Estonian Senior Civil Service. The article shows that the concept of public service bargain can help to understand and systematise the causes of leaving the Senior Civil Service. It is particularly useful in distinguishing between voluntary and involuntary turnover and in linking the turnover with political–administrative relations and loyalty issues. Since public service bargain does not specifically focus on voluntary exit, other approaches known from management literature are relevant for the operationalisation of voluntary turnover and complementing the public service bargain-based model for researching turnover of top executives. The empirical study maps the people who left the Estonian Senior Civil Service in 2009–2013 and analyses and systematises various causes of their departure on the basis of semi-structured interviews (70% response rate). The empirical study shows that the turnover of top executives can be considerable even without much direct political influence. It is found that job insecurity combined with the domination of individual unwritten public service bargains tends to lead to ambiguity in the perception of the roles of top executives, which in turn causes conflicts and dissatisfaction, materialising in high voluntary turnover.

Changes in corporate governance and top executive turnover: The evidence from Japan

We examine the turnover of top executives in Japanese firms throughout the period 1990–2013. During this time, the presence of a main bank has been weakened, the ownership of institutional investors has rapidly increased, and independent outside directors have been introduced in many firms. We find that top executive turnover sensitivity to corporate performance has not changed despite skepticism on corporate governance of Japanese firms. On the other hand, there is a shift from return on assets (ROA) to return on equity (ROE) and stock returns as performance indicators that turnover is most sensitive to. We also examine possible sources of this change. We find that foreign institutional investors strengthen the turnover sensitivity to ROE after banking crisis when their shareholding has dramatically increased. This result allows us to interpret that they began to play a disciplinary role. In contrast, we do not find that independent outside directors have any significant effect of enhancing turnover sensitivity to ROE, unless a firm appointed independent outside directors more than three. While the scope of the main bank's authority has substantially contracted, strong ties with main banks increase turnover sensitivity in the more recent period, indicating that main banks continue to perform a certain role in disciplining management.

The Role of Deferred Pay in Retaining Managerial Talent

We examine the role of deferred vesting of stock and option grants in reducing executive turnover. To the extent an executive forfeits all unvested stock and option grants if she leaves the firm, deferred vesting will increase the cost (to the executive) of early exit. Using pay Duration proposed in Gopalan, et al. (2014) as a measure of the extent of deferred vesting, we find that CEOs and non-CEO executives with longer pay Duration are less likely to leave the firm voluntarily. Employing the vesting of a large prior-year stock/option grant as an instrument for Duration, we find the effect to be causal. Consistent with long pay Duration reflecting firms’ retention intentions, CEOs with longer pay Duration are also less likely to experience a forced turnover and the sensitivity of forced turnover to firm performance is significantly lower among firms that grant longer pay Duration. Overall, our study highlights a strong link between compensation design and turnover of top executives.

Who Captures the Power of the Pen?

We study how political capture affects the corporate governance role of the media. Relying on a unique media market in China that is characterized by the prevalence of both state-controlled and market-oriented media, we manually construct a comprehensive financial news sample containing 80,008 articles during the 2004-2010 period and provide evidence that negative coverage by the market-oriented media significantly increases the chance of forced top executive turnover, whereas similar coverage by the state-controlled media has no such impact. Tests based on instrumental variable and exogenous experiments provide positive evidence of the casual link.

Pay Disparity, External Pay Alternatives and Turnover of the Second Best Paid Executive

We contribute to the intersection of top executive turnover and compensation research by investigating pay structure implications on turnover, focusing on the second best-paid executive as the one being closest to winning the tournament for the best-paid position. Building on tournament theory and using competing-risks survival regression, we develop and test hypotheses with regard to the effects of pay disparity among a firm’s top executives and external pay alternatives on the exit of the second best-paid executive. For a sample of S&P 500 firms in the 14-year period between 1993 and 2006, we find that comparisons with higher paid executives and external pay alternatives matter for individuals’ decisions whether to stay in or to leave a pay tournament, whereas comparisons to lower paid executives do not.

"Pay Disparity, External Pay Alternatives and Turnover of the Second Best Paid Executive"

We contribute to the intersection of top executive turnover and compensation research by investigating pay structure implications on turnover, focusing on the second best-paid executive as the one being closest to winning the tournament for the best-paid position. Building on tournament theory and using competing-risks survival regression, we develop and test hypotheses with regard to the effects of pay disparity among a firm’s top executives and external pay alternatives on the exit of the second best-paid executive. For a sample of S&P 500 firms in the 14-year period between 1993 and 2006, we find that comparisons with higher paid executives and external pay alternatives matter for individuals’ decisions whether to stay in or to leave a pay tournament, whereas comparisons to lower paid executives do not.

Organizational Form, Ownership Structure, and Top Executive Turnover: Evidence from the Property-Casualty Insurance Industry

We investigate the role of organizational form and ownership structure in corporate governance by examining CEO turnover in the U.S. property-casualty insurance industry. The probability of non-routine turnover has a significant negative relationship with firm performance, and outside succession dominates when non-routine turnover occurs. Turnover probabilities vary significantly by organizational form and ownership structure. Closely-held stocks have lower non-routine turnover-performance sensitivity than publicly-traded stocks. The probability of non-routine CEO turnover is lower for mutuals than for closely held and publicly-traded non-family-owned stock firms. Family firms with family-member CEOs have the lowest turnover rate of any ownership type, and incoming successors in closely-held family firms mainly come from the controlling families.

The effectiveness of the mandatory disclosure of independent directors’ opinions: Empirical evidence from China

Since 2001, the regulatory authority of the Chinese stock market has required the independent directors of listed firms to disclose their opinions on important board decisions. Using a novel dataset of independent directors’ opinions, this study examines the effectiveness of that mandatory disclosure requirement. We find that the stock market reacts negatively to announcements of independent directors saying ‘no’. Firms with more severe agency problems are prone to experiencing independent directors saying ‘no’. Independent directors are also more likely to say ‘no’ when they have multiple directorships, longer tenure, financial expertise, or live in places other than where the firms they serve are located. Consequently, firms with independent directors who say ‘no’ tend to experience cuts in inter-corporate lending, a lower propensity to pay dividends, reduced bank loans, and greater turnover of top executives. In addition, these firms are more likely to receive a modified audit opinion, obtain ‘special treatment’, or be subject to regulatory enforcement action in the year after independent directors say ‘no’. Overall, the results indicate that independent directors saying ‘no’ can help to protect the interests of outside investors, and thus lend support to regulations mandating the disclosure of independent directors’ opinions.

Exposé of Pinkwashing: Couldn’t be Timelier

Readers of Sex Roles will doubtless have heard of the Susan G. Komen Breast Cancer Foundation (http://ww5.komen. org/), now renamed Susan G Komen For the Cure, the largest breast cancer awareness fundraising organization in the world and one of the most successful charities in any domain. It is largely U. S.-based, but has a substantial global reach, begun in 2007 (http://ww5.komen.org/aboutus/ globalinitiatives.html). Many may even have participated in the runs, walks, and endless stream of consumer fundraisers (“Buy your Kentucky Fried Chicken in a Pink Ribbon bucket”) sponsored by Komen (as the Foundation is known) in many different countries. Founded in 1982, Komen now operates at the very highest levels of philanthropy, raising over $420million in 2010 for breast cancer awareness, screening, and research programs (Singer 2011). However, in the last year Komen has received negative publicity for its administrative style and conservative political choices, and has drawn the attention of investigative journalists. In October, 2011, during the annual Komenmade-famous “Breast Cancer Awareness Month,” New York Times business reporter Natasha Singer (2011) wrote a major article that raised many questions about the financial and corporate-friendly elements of Komen’s operations. And then, early in 2012, Komen announced its decision (reversed within a few days, but with continuing repercussions of diminished funding and top executive turnover) to stop funding breast cancer screening at Planned Parenthood for political reasons (Madison 2012). Whether the organization survives these turbulent times or not, Komen’s lasting contribution will have been to the nascent field of cause marketing to brand “pink ribbons” as the symbol of breast cancer and breast cancer awareness. Sociologist Samantha King (2008) provided a wonderful examination of how breast cancer advocacy (and cause marketing) got transformed from feminist grassrootsdriven activism to corporate-sponsored marketing in a book based on her dissertation. Her slim book packs a wallop of information and outrage, and it eventually came to the attention of documentarians. Now we have the film, Pink Ribbons, Inc, to bring the facts and perspectives of King’s book to the screen. It features lengthy interviews with a wide variety of leading players in the breast cancer fundraising and marketing controversies, from those who are pro-corporate philanthropy to long-time critics. In addition there are many scenes of the largest (and they are huge!) U. S. breast cancer fundraising and awareness events in New York, Washington, DC, San Francisco, and Montreal, along with poignant interviews with event participants who believe they are honoring their mothers, sisters and daughters as they raise money to fund research and services that they hope will cure cancer and save women’s lives. Also deeply moving are the interviews with a group of women with stage 4 (“there is no stage 5”) breast cancer who feel that pink ribbon culture makes women with advanced disease into losers who just didn’t try hard enough. They offer a unique and powerful critical perspective. Samantha King provides much of the sociohistorical background in her on-camera interviews, framing the growth of corporate health philanthropy as an outgrowth of Reaganomics, specifically its shift of responsibility for healthcare research and services away from government to the private sector. Barbara Brenner, former executive director of the anti-corporate grassroots group, Breast Cancer Action, talks about the misleading emphasis by mass media and patient groups like Komen on “early detection is the best protection.” She explains our growing understanding of the diversity among breast cancers and how detecting some early does no good, while detecting others early is unnecessary. Our whole notion of cancer as some sort of indwelling Not yet available for individual or educational sale.

Who Benefits in an Insider Negotiated Block Trade?

We examine insider negotiated block trades to investigate whether new active blockholders with special expertise create shareholder value. In contrast to existing studies, we find no reliable overall evidence of permanent stock price increases, operating changes, or improved net of industry profitability associated with these major control changes. Top executive turnover is extensive, but appears largely attributable to the block sellers’ actions, not the imposition of discipline by the block buyer. Results suggest initial shareholder gains anticipate takeovers, not improvements in profitability. When a takeover is not forthcoming, the gain disappears.

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

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.