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CEO Turnover: Governance Mechanisms, Company Performance and Restructuring in the U.K. and Germany

This thesis examines CEO turnover determinants along with company post-turnover performance and restructuring activities concerning corporations in the U.K. and Germany from 1995 to 2004. Data are taken from several sources, including COMPUSTAT, Hoppenstedt Aktienfuehrer, Manifest U.K., Thomson One Banker, Factiva and Capital IQ.
I focus on the differences in the way managerial turnover is affected by ownership structure, board composition, takeover pressure and debt. Although the forces examined in this study play a different role in U.K. and German firms, they have a similar combined effect.
The main findings are that managers are held accountable for poor past performance in both countries, operating results improve (worsen) after CEOs are replaced following bad (good) performance, and, lastly, there is cross-country evidence of newly appointed CEOs undertaking similar restructuring activities. These findings suggest that, although the governance regimes of the U.K. and Germany rely on different mixes of monitoring mechanisms, they are both effective in replacing poorly performing CEOs with better executives. Moreover, newly appointed managers undertake similar restructuring measures when they join poorly performing firms despite vast differences in employment law in the two countries.

Mostra/Nascondi contenuto.
5 1. Introduction CEO removals are considered crucial events in order to understand those governance mechanisms which discipline managers, avoiding deviation from value-maximizing corporate policies (Jensen and Warner (1988)). If all economic systems face the same principal-agent problem, CEO changes should also represent important disciplinary forces for different countries. This thesis focuses on CEO changes, providing an analysis of differences in governance mechanisms, company performance and corporate restructuring activities in the U.K. and Germany. Early studies on managerial turnover by Coughlan and Schmidt (1985), Warner, Watts and Wruck (1988), Weisbach (1988) and Jensen and Murphy (1990) suggest turnover being negatively related to past performance. More recently, Kaplan (1994b), Renneboog (2000), Franks, Mayer, and Renneboog (2001), Volpin (2002) and Maury (2006) confirm this evidence. However, most of the reference literature on CEO turnover has focused on single-country studies with the only exception of Kaplan (1994a) 1 . The main contribution of this thesis is to search for cross-country evidence of the causes and effects of CEO changes. In detail, I examine whether negative past performance increases the likelihood of CEO turnover in both countries. I investigate which governance mechanisms influence managerial turnover under different governance regimes, and if their influence increases for underperforming firms. Moreover, I search for cross-country evidence in terms of post-turnover performance reversals and corporate restructuring. I have taken the U.K. and Germany since they represent two opposite legal and economic systems, displaying vast differences in matters such as investor protection, financial 1 Kaplan (1994a) analyses corporations from the U.S. and Japan and finds that negative past performance increases the likelihood of CEO turnover in a similar way in both countries.

Laurea liv.II (specialistica)

Facoltà: Economia

Autore: Enrico Ottavio Aldo Tolusso Contatta »

Composta da 69 pagine.


Questa tesi ha raggiunto 583 click dal 17/02/2011.

Disponibile in PDF, la consultazione è esclusivamente in formato digitale.