Top Management Turnover Under the Influence of Activist Investors

Forthcoming, Journal of Management and Governance

50 Pages Posted: 5 Sep 2015

See all articles by Barbara Voussem

Barbara Voussem

WHU - Otto Beisheim School of Management - Institute of Management Accounting and Control

Utz Schäffer

WHU Otto Beisheim School of Management

Denis Schweizer

Concordia University

Date Written: September 5, 2015

Abstract

We analyze the presence of activist investors (hedge funds and private equity funds) and their impact on top management turnover in Germany. We contrast two hypotheses. The monitoring hypothesis is based on agency theory. Under this hypothesis, we expect active investors to increase top management turnover as a consequence of their monitoring efforts. Under the restraint hypothesis, we expect active investors to exert little influence on top management turnover in consequence of the comparatively limited discretion they have in Germany due to, e.g., regulatory restraints. We test both hypotheses using an event history analysis based on a sample of top managers in the 100 largest German corporations between 1998 and 2008. Contrary to studies based on agency theory in a U.S. context, and in accordance with the restraint hypothesis, we do not find increased top management turnover under the presence of activist investors. The presence of private equity funds is not associated with any significant influence on turnover, but that of hedge funds may even reduce top management turnover.

Keywords: Corporate Governance, Hedge Fund, Management Turnover, Private Equity, Shareholder Activism

JEL Classification: G14, G32, G34, G38

Suggested Citation

Voussem, Barbara and Schäffer, Utz and Schweizer, Denis, Top Management Turnover Under the Influence of Activist Investors (September 5, 2015). Forthcoming, Journal of Management and Governance, Available at SSRN: https://ssrn.com/abstract=2656579

Barbara Voussem

WHU - Otto Beisheim School of Management - Institute of Management Accounting and Control ( email )

Burgplatz 2
Vallendar, 56179
Germany

Utz Schäffer

WHU Otto Beisheim School of Management ( email )

Burgplatz 2
Vallendar, D-56179
Germany

HOME PAGE: http://www.whu.edu/controlling

Denis Schweizer (Contact Author)

Concordia University ( email )

1455 de Maisonneuve Blvd. W.
Montreal, Quebec H3G 1M8
Canada
+1 (514) 848-2424 ext. 2926 (Phone)
+1 (514) 848-4500 (Fax)

HOME PAGE: http://www.concordia.ca/jmsb/faculty/denis-schweizer.html

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