The decline of takeovers and disciplinary managerial turnover

We compare top management turnover in unacquired U.S. industrial companies during an active takeover market (1984-1988) and a less active takeover market (1989-1993). For firms in the lowest quartile of performance (measured by operating income scaled by assets), 33% experience complete turnover of the president, CEO, and board chair during the active takeover period and only 17% experience complete turnover during the less active period. Controlling for various determinants of management turnover, we provide evidence that turnover and performance are related only in the active takeover period, and conclude that takeover activity affects the intensity of managerial discipline.