Enterprise performance and management turnover in the Czech Republic

We study the effect of management turnover on changes in enterprise performance, using a cross-section of 706 Czech firms over the 1993-1997 period. Controlling for initial conditions, equity holdings by managers, and firm- and sector-specific effects, we find that the appointment of new managers is associated with improvements in profit margins and labor productivity, particularly if those managers were selected by private owners. The results highlight the importance of human capital in transition economies in bringing about improvements in corporate performance, (C) 1999 Elsevier Science B.V. All rights reserved.