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CEO Turnover and Foreign Market Participation

  • Bruce Blonigen
  • Rossitza B. Wooster

Anecdotal evidence suggests that new CEOs with foreign backgrounds direct their firms to become more international in their operations. We examine this hypothesis formally using data on U.S. S&P-500 manufacturing firms from 1992 through 1997 and biographical information on CEOs' birth and education locations that allow us to identify changes from U.S.- to foreign-connected CEOs. Robust to a variety of specifications, we find that a U.S. firm's switch from a U.S. to a foreign CEO leads to substantial increases in the firm's proportion of its foreign assets and foreign affiliate sales. In fact, our preferred specification indicates that foreign asset and affiliate sales proportions increase 30 and 50%, respectively, for the five years after there is CEO turnover to one with a foreign background. This is in contrast to U.S.-to-U.S. CEO switches in our sample that show no evidence of changes in a firms' foreign market participation. These large effects contrast with previous literature that finds little evidence for changes in firm performance with CEO turnover.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9527.

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Date of creation: Mar 2003
Date of revision:
Handle: RePEc:nbr:nberwo:9527
Note: CF ITI
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  1. Greaney, Theresa M., 2003. "Reverse importing and asymmetric trade and FDI: a networks explanation," Journal of International Economics, Elsevier, vol. 61(2), pages 453-465, December.
  2. Murphy, Kevin J. & Zimmerman, Jerold L., 1993. "Financial performance surrounding CEO turnover," Journal of Accounting and Economics, Elsevier, vol. 16(1-3), pages 273-315, April.
  3. Pugel, Thomas A & Kragas, Erik S & Kimura, Yui, 1996. "Further Evidence on Japanese Direct Investment in U.S. Manufacturing," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 208-13, May.
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  7. James E. Rauch & Vitor Trindade, 2002. "Ethnic Chinese Networks In International Trade," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 116-130, February.
  8. Blonigen, Bruce A. & Ellis, Christopher J. & Fausten, Dietrich, 2005. "Industrial groupings and strategic FDI," Japan and the World Economy, Elsevier, vol. 17(2), pages 125-150, April.
  9. Keith Head & John Ries, 1998. "Immigration and Trade Creation: Econometric Evidence from Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 31(1), pages 47-62, February.
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  11. James E. Rauch, 2001. "Business and Social Networks in International Trade," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1177-1203, December.
  12. Head, Keith & Ries, John & Swenson, Deborah, 1995. "Agglomeration benefits and location choice: Evidence from Japanese manufacturing investments in the United States," Journal of International Economics, Elsevier, vol. 38(3-4), pages 223-247, May.
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  16. Strong, John S & Meyer, John R, 1987. " Asset Writedowns: Managerial Incentives and Security Returns," Journal of Finance, American Finance Association, vol. 42(3), pages 643-61, July.
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