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Executive transitions, firm performance, organizational survival al and the nature of the principal-agent contract

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  • Gutiérrez, Isabel
  • Núñez-Nickel, Manuel
  • Gómez-Mejía, Luis R.

Abstract

Using an agency framework, this study examines how executive transitions very according to the nature of the relationship between agent and principal, tirm performance, and the executive's relative power. Using the entire population of Spanish newspapers during the period 1966-1993, we tind that declining performance is a precursor of executive changes, but that the impact is much greater for the second person in command. This suggests that entrenchment allows the top executive to be relatively insulated from firm performance, yet hold his/her subordinate accountable for that performance. We also find, contrary to an "scapegoat" or population ecology prediction, that executive changes have a positive impact on firm survival, and that the salutary organizational effect of managerial transitions is greatest for the top executive.

Suggested Citation

  • Gutiérrez, Isabel & Núñez-Nickel, Manuel & Gómez-Mejía, Luis R., 1997. "Executive transitions, firm performance, organizational survival al and the nature of the principal-agent contract," DEE - Working Papers. Business Economics. WB 7032, Universidad Carlos III de Madrid. Departamento de Economía de la Empresa.
    • Handle: RePEc:cte:wbrepe:7032
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    References listed on IDEAS

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    1. Weisbach, Michael S., 1988. "Outside directors and CEO turnover," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 431-460, January.
    2. Levinthal, Daniel & March, James G., 1981. "A model of adaptive organizational search," Journal of Economic Behavior & Organization, Elsevier, vol. 2(4), pages 307-333, December.
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