Explaining top management turnover in private corporations: The role of cross-country legal institutions and capital market forces

Ugur Lel (), Darius Miller () and Natalia Reisel ()
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Ugur Lel: University of Georgia
Darius Miller: Southern Methodist University
Natalia Reisel: Fordham University

Journal of International Business Studies, 2019, vol. 50, issue 5, No 3, 720-739

Abstract: Abstract We investigate private firms’ ability to identify and replace poorly performing managers across countries. We document three main findings. First, private firms are more likely to retain poorly performing managers in countries where legal institutions that protect minority investors are weak. Second, private firms are more likely to retain poorly performing managers than public firms only in countries where governance mechanisms inherent in public equity markets limit managerial entrenchment in public firms. Third, private firm managers are less likely to be replaced even when poor performance continues for relatively long horizons. Overall, our findings provide new evidence on the potential vulnerability of minority shareholders in private firms.

Keywords: corporate governance; international investor protection; ownership structure; agency theory (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (5)

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DOI: 10.1057/s41267-019-00217-9

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