Performance changes following top management dismissals

Article Abstract:

We document that forced resignations of top managers are preceded by large and significant declines in operating performance and followed by large improvements in performance. However, forced resignations are rare and are due more often to external factors (e.g., blockholder pressure, takeover attempts, etc.) than to normal board monitoring. Following the management change, these firms significantly downsize their operations and are subject to a high rate of corporate control activity. Normal retirements are followed by small increases in operating income and are also subject to a slightly higher than normal incidence of postturnover corporate control activity. (Reprinted by permission of the publisher.)

Research, Performance, Executive dismissals

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Agency problems, equity ownership, and corporate diversification

Article Abstract:

We provide evidence on the agency cost explanation for corporate diversification. We find that the level of diversification is negatively related to managerial equity ownership and to the equity ownership of outside blockholders. In addition, we report that decreases in diversification are associated with external corporate control threats, financial distress, and management turnover. These findings suggest that agency problems are responsible for firms maintaining value-reducing diversification strategies and that the recent trend toward increased corporate focus is attributable to market disciplinary forces. (Reprinted by permission of the publisher.)

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Agency theory and the influence of equity ownership structure on corporate diversification strategies

Article Abstract:

Research indicates that corporate strategy is influenced by ownership structure. This finding was obtained through testable predictions drawn from agency theory and applied to the relation between diversification strategies and equity ownership structure.

United States, Decision-making, Decision making, Planning, Management

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