Discontinued Operations and Turnover Among Top Executives

While previous research has suggested the coincidence of CEO turnover and real changes in firm operations such as discontinued operations, we demonstrate that such findings apply only to specific types of CEO turnover, and only if other top executives also exit the firm. Categorizing specific reasons for CEO departure, the strongest effect is for cases of resignation by the CEO; but this occurs only for CEO resignations that are accompanied by the departure of other top executives. We also find real effects linked to turnover by top executives even if the CEO does not leave. Thus, our analysis highlights the key role of departures of top executives other than the CEO in predicting changes in the direction of the firm. The results are consistent with agency-based theories that consider the turnover behavior of top executives, in particular that top managers may escalate commitment to a project in order to protect reputation