Turnover at the Top: Executive Team Departures and Firm Performance

Jake G. Messersmith · Jeong Yeon Lee · James P. Guthrie · Yong‐Yeon Ji

115 citations0/0 files storedOrganization Science

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Corporate Finance and Governance Innovation and Knowledge Management Human Resource and Talent Management

Abstract

In a departure from the historical focus on individual-level turnover, scholars have recently examined turnover at the collective level. Building on this work, we invoke human and social capital arguments and analyze the implications of varying rates of top management team (TMT) turnover for firm performance. Our principal finding is that TMT departures have deleterious effects on subsequent firm performance, though we find evidence to suggest that this effect is nonlinear. Results also suggest that higher levels of average organizational tenure of the TMT will modestly attenuate this negative effect. Contrary to arguments grounded in the managerial discretion literature, environmental munificence weakened the negative effects of TMT turnover rates on subsequent firm performance, whereas the hypothesized moderating effects for both industry complexity and instability were not supported.

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References

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