Corporate Performance, Corporate Takeovers, and Management Turnover

Corporate Performance, Corporate Takeovers, and Management Turnover

This paper examines the hypothesis that an important role of corporate takeovers is to discipline the top managers of poorly performing target firms. We document that the turnover rate for the top manager of target firms in tender offer-takeovers significantly increases following completion of the t...

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Bibliographic Details
Published in:The Journal of finance (New York) 1991-06, Vol.46 (2), p.671-687
Main Authors: MARTIN, KENNETH J., MCCONNELL, JOHN J.
Format: Article
Language:eng
Subjects:
Acquisitions & mergers
Business management
Business structures
Chief executive officers
Financial management
Hostile takeovers
Hostility
Industrial market
Industry
Labour turnover
Management
Manager behavior
Mergers
Modeling
Shorter Papers
Statistical analysis
Studies
Take-overs
Tender offers
Turnover
Upper management
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Summary:This paper examines the hypothesis that an important role of corporate takeovers is to discipline the top managers of poorly performing target firms. We document that the turnover rate for the top manager of target firms in tender offer-takeovers significantly increases following completion of the takeover and that prior to the takeover these firms were significantly under-performing other firms in their industry as well as other target firms which had no post-takeover change in the top executive. We interpret the results to indicate that the takeover market plays an important role in controlling the nonvalue maximizing behavior of top corporate managers.
ISSN:0022-1082
1540-6261