IDEAS home Printed from https://ideas.repec.org/a/kap/jbuset/v173y2021i1d10.1007_s10551-020-04534-0.html
   My bibliography  Save this article

Frequent CEO Turnover and Firm Performance: The Resilience Effect of Workforce Diversity

Author

Listed:
  • Youngsang Kim

    (Sungkyunkwan University)

  • Sophia Soyoung Jeong

    (Zayed University)

  • Daphne W. Yiu

    (The Chinese University of Hong Kong)

  • Jinhee Moon

    (Sungkyunkwan University)

Abstract

CEO turnover (or succession) is a critical event in an organization that influences organizational processes and performance. The objective of this study is to investigate whether workforce diversity (i.e., age, gender, and education-level diversity) might have a resilience effect on firm performance under the frequency of CEO turnover. Based on a sample of 409 Korean firms from 2010 to 2015, our results show that firms with more frequent CEO turnover have a lower firm performance. However, firms with more gender and education-level diversity could buffer the disruptive effect of frequent CEO turnover on firm performance to offer a benefit to the organization. Our theory and findings suggest that effectively managing diverse workforce can be a resilience factor in an uncertain organizational environment because diverse workforce has complementary skills and behaviors that can cope better with uncertainty and signals social inclusion of an organization, thus fostering a long-term exchange relationship. These findings contribute to the literature on CEO turnover (or succession) and diversity.

Suggested Citation

  • Youngsang Kim & Sophia Soyoung Jeong & Daphne W. Yiu & Jinhee Moon, 2021. "Frequent CEO Turnover and Firm Performance: The Resilience Effect of Workforce Diversity," Journal of Business Ethics, Springer, vol. 173(1), pages 185-203, September.
    • Handle: RePEc:kap:jbuset:v:173:y:2021:i:1:d:10.1007_s10551-020-04534-0
    DOI: 10.1007/s10551-020-04534-0
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10551-020-04534-0
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s10551-020-04534-0?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Danny Miller & Jamal Shamsie, 2001. "Learning across the life cycle: Experimentation and performance among the hollywood studio heads," Strategic Management Journal, Wiley Blackwell, vol. 22(8), pages 725-745, August.
    2. Christian Grund & Niels Westergaard-Nielsen, 2008. "The Dispersion of Employees' Wage Increases and Firm Performance," ILR Review, Cornell University, ILR School, vol. 61(4), pages 485-501, July.
    3. Heather A. Haveman & Michael V. Russo & Alan D. Meyer, 2001. "Organizational Environments in Flux: The Impact of Regulatory Punctuations on Organizational Domains, CEO Succession, and Performance," Organization Science, INFORMS, vol. 12(3), pages 253-273, June.
    4. Jenny María Ruiz-Jiménez & María del Mar Fuentes-Fuentes & Matilde Ruiz-Arroyo, 2016. "Knowledge Combination Capability and Innovation: The Effects of Gender Diversity on Top Management Teams in Technology-Based Firms," Journal of Business Ethics, Springer, vol. 135(3), pages 503-515, May.
    5. Danny Miller, 1991. "Stale in the Saddle: CEO Tenure and the Match Between Organization and Environment," Management Science, INFORMS, vol. 37(1), pages 34-52, January.
    6. McDougall, Patricia Phillips & Oviatt, Benjamin M., 1996. "New venture internationalization, strategic change, and performance: A follow-up study," Journal of Business Venturing, Elsevier, vol. 11(1), pages 23-40, January.
    7. Clint Chadwick & Janice F. Super & Kiwook Kwon, 2015. "Resource orchestration in practice: CEO emphasis on SHRM, commitment-based HR systems, and firm performance," Strategic Management Journal, Wiley Blackwell, vol. 36(3), pages 360-376, March.
    8. Michael L. Tushman & Lori Rosenkopf, 1996. "Executive Succession, Strategic Reorientation and Performance Growth: A Longitudinal Study in the U.S. Cement Industry," Management Science, INFORMS, vol. 42(7), pages 939-953, July.
    9. Igor Filatotchev & Steve Toms, 2003. "Corporate Governance, Strategy and Survival in a Declining Industry: A Study of UK Cotton Textile Companies," Journal of Management Studies, Wiley Blackwell, vol. 40(4), pages 895-920, June.
    10. Muhammad Ali & Yin Ng & Carol Kulik, 2014. "Board Age and Gender Diversity: A Test of Competing Linear and Curvilinear Predictions," Journal of Business Ethics, Springer, vol. 125(3), pages 497-512, December.
    11. Krug, Jeffrey A. & Nigh, Douglas, 2001. "Executive perceptions in foreign and domestic acquisitions: an analysis of foreign ownership and its effect on executive fate," Journal of World Business, Elsevier, vol. 36(1), pages 85-105, April.
    12. Sara L. Keck, 1997. "Top Management Team Structure: Differential Effects by Environmental Context," Organization Science, INFORMS, vol. 8(2), pages 143-156, April.
    13. Jyoti Mahadeo & Teerooven Soobaroyen & Vanisha Hanuman, 2012. "Board Composition and Financial Performance: Uncovering the Effects of Diversity in an Emerging Economy," Journal of Business Ethics, Springer, vol. 105(3), pages 375-388, February.
    14. Gao, Huasheng & Harford, Jarrad & Li, Kai, 2017. "CEO Turnover–Performance Sensitivity in Private Firms," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 52(2), pages 583-611, April.
    15. Ayse Karaevli, 2007. "Performance consequences of new CEO ‘Outsiderness’: Moderating effects of pre‐ and post‐succession contexts," Strategic Management Journal, Wiley Blackwell, vol. 28(7), pages 681-706, July.
    16. Young Kyun Chang & Won-Yong Oh & Jee Hyun Park & Myoung Gyun Jang, 2017. "Exploring the Relationship Between Board Characteristics and CSR: Empirical Evidence from Korea," Journal of Business Ethics, Springer, vol. 140(2), pages 225-242, January.
    17. Stephen Bear & Noushi Rahman & Corinne Post, 2010. "The Impact of Board Diversity and Gender Composition on Corporate Social Responsibility and Firm Reputation," Journal of Business Ethics, Springer, vol. 97(2), pages 207-221, December.
    18. Ioanna Boulouta, 2013. "Hidden Connections: The Link Between Board Gender Diversity and Corporate Social Performance," Journal of Business Ethics, Springer, vol. 113(2), pages 185-197, March.
    19. Idalene F. Kesner & Dan R. Dalton, 1994. "Top Management Turnover And Ceo Succession: An Investigation Of The Effects Of Turnover On Performance," Journal of Management Studies, Wiley Blackwell, vol. 31(5), pages 701-713, September.
    20. Saskia Crucke & Mirjam Knockaert, 2016. "When Stakeholder Representation Leads to Faultlines. A Study of Board Service Performance in Social Enterprises," Journal of Management Studies, Wiley Blackwell, vol. 53(5), pages 768-793, July.
    21. Gary A. Ballinger & Jeremy J. Marcel, 2010. "The use of an interim CEO during succession episodes and firm performance," Strategic Management Journal, Wiley Blackwell, vol. 31(3), pages 262-283, March.
    22. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 87(3), pages 355-374.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kaori Narita & J.D. Tena & Babatunde Buraimo, 2022. "Causal and Consequences of Multiple Dismissals: Evidence from Italian Football League," Working Papers 202226, University of Liverpool, Department of Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gjerløv-Juel, Pernille, 2019. "Executive turnover – Firms’ subsequent performances and the moderating role of organizational characteristics," European Management Journal, Elsevier, vol. 37(6), pages 794-805.
    2. Ranjita Islam & Erica French & Muhammad Ali, 2022. "Evaluating board diversity and its importance in the environmental and social performance of organizations," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 29(5), pages 1134-1145, September.
    3. Nguyen, Thi Hong Hanh & Ntim, Collins G. & Malagila, John K., 2020. "Women on corporate boards and corporate financial and non-financial performance: A systematic literature review and future research agenda," International Review of Financial Analysis, Elsevier, vol. 71(C).
    4. Ahrens, Jan-Philipp & Uhlaner, Lorraine & Woywode, Michael & Zybura, Jan, 2018. "“Shadow emperor” or “loyal paladin”? – The Janus face of previous owner involvement in family firm successions," Journal of Family Business Strategy, Elsevier, vol. 9(1), pages 73-90.
    5. Nooraisah Katmon & Zam Zuriyati Mohamad & Norlia Mat Norwani & Omar Al Farooque, 2019. "Comprehensive Board Diversity and Quality of Corporate Social Responsibility Disclosure: Evidence from an Emerging Market," Journal of Business Ethics, Springer, vol. 157(2), pages 447-481, June.
    6. Samuel Benjamin & Mansi Mansi & Rakesh Pandey, 2020. "Board gender composition, board independence and sustainable supply chain responsibility," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(4), pages 3305-3339, December.
    7. Guoli Chen & Donald C. Hambrick, 2012. "CEO Replacement in Turnaround Situations: Executive (Mis)Fit and Its Performance Implications," Organization Science, INFORMS, vol. 23(1), pages 225-243, February.
    8. Jaka Cepec & Peter Grajzl, 0. "Management turnover, ownership change, and post-bankruptcy failure of small businesses," Small Business Economics, Springer, vol. 0, pages 1-27.
    9. Jaka Cepec & Peter Grajzl, 2021. "Management turnover, ownership change, and post-bankruptcy failure of small businesses," Small Business Economics, Springer, vol. 57(1), pages 555-581, June.
    10. Lu, Yun & Ntim, Collins G. & Zhang, Qingjing & Li, Pingli, 2022. "Board of directors’ attributes and corporate outcomes: A systematic literature review and future research agenda," International Review of Financial Analysis, Elsevier, vol. 84(C).
    11. Hadem, Michael, 2010. "Bedingungen und Konsequenzen des Wechsels von Finanzvorständen - Eine Analyse in großen börsennotierten Unternehmen," EconStor Theses, ZBW - Leibniz Information Centre for Economics, number 43681, July.
    12. James J. Cordeiro & Giorgia Profumo & Ilaria Tutore, 2020. "Board gender diversity and corporate environmental performance: The moderating role of family and dual‐class majority ownership structures," Business Strategy and the Environment, Wiley Blackwell, vol. 29(3), pages 1127-1144, March.
    13. Fujiao Xie & Ying Guo & Shirley J. Daniel & Yuanyang Liu, 2024. "The dynamic relation between board gender diversity and firm performance: the moderating role of shareholder activism," Review of Quantitative Finance and Accounting, Springer, vol. 62(1), pages 225-246, January.
    14. Kent Baker, H. & Pandey, Nitesh & Kumar, Satish & Haldar, Arunima, 2020. "A bibliometric analysis of board diversity: Current status, development, and future research directions," Journal of Business Research, Elsevier, vol. 108(C), pages 232-246.
    15. Nicola Cucari & Salvatore Esposito De Falco & Beatrice Orlando, 2018. "Diversity of Board of Directors and Environmental Social Governance: Evidence from Italian Listed Companies," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 25(3), pages 250-266, May.
    16. Olie René & Heijltjes Mariëlle G. & Glunk Ursula, 2003. "Continuity And Renewal At The Top: Performance Effects Of The Level, Extent, Type And Frequency Of Top Management Team Changes," Research Memorandum 059, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    17. Weiwen Li & Yuan Lu, 2012. "CEO dismissal, institutional development, and environmental dynamism," Asia Pacific Journal of Management, Springer, vol. 29(4), pages 1007-1026, December.
    18. Adeel Mustafa & Abubakr Saeed & Muhammad Awais & Shahab Aziz, 2020. "Board-Gender Diversity, Family Ownership, and Dividend Announcement: Evidence from Asian Emerging Economies," JRFM, MDPI, vol. 13(4), pages 1-20, March.
    19. Ayman Issa & Mohammad A. A. Zaid & Jalal Rajeh Hanaysha, 2022. "Exploring the relationship between female director's profile and sustainability performance: Evidence from the Middle East," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(6), pages 1980-2002, September.
    20. Muhammad Ali & Yin Ng & Carol Kulik, 2014. "Board Age and Gender Diversity: A Test of Competing Linear and Curvilinear Predictions," Journal of Business Ethics, Springer, vol. 125(3), pages 497-512, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:jbuset:v:173:y:2021:i:1:d:10.1007_s10551-020-04534-0. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.