Dust in the Wind: Causes and Consequences of Managerial Replacements

If the economic performance of a firm is disappointing, the manager may be replaced. Whether that improves performance is unclear. For regular firms, it is often difficult to study the causes and consequences of managerial replacement due to limited data availability. This is different for sports clubs, where high-quality data are available on a regular basis. The current paper studies managerial replacements in professional football in the Netherlands. Disappointment is measured by two indicators that use bookmaker expectations as a reference. Points surprise is based on actual results, while performance surprise is based on expected goals. The analysis shows that within-season managerial replacements are more likely when there is disappointment, that is, when both surprise indicators are negative. Match results improve after managerial replacement. However, this improvement is not causal: a counterfactual analysis suggests that match results would have improved even in the absence of managerial replacement.