CEO TURNOVER AND THE FIRMS INVESTMENT DECISIONS

This paper examines the relation between management turnover and dives titures of recently acquired divisions. The empirical results indicate that at the time of a management change, there is an increased probab ility of divesting an acquisition at a loss or one considered unprofit able by the press. The probability increases by about the same amount regardless of whether the change is an apparent age-65 retirement or a resignation. Overall, the results are consistent with a variety of ag ency-based theories of corporate investment and suggest that managemen t changes are important events for corporations because they lead to r eversals of poor prior decisions.