THE DECLINE OF TAKEOVERS AND DISCIPLINARY MANAGERIAL TURNOVER

We compare top management turnover in unacquired U.S. industrial compa nies during an active takeover market (1984-1988) and a less active ta keover market (1989-1993). For firms in the lowest quartile of perform ance (measured by operating income scaled by assets), 33% experience c omplete turnover of the president, CEO, and board chair during the act ive takeover period and only 17% experience complete turnover during t he less active period. Controlling for various determinants of managem ent turnover, we provide evidence that turnover and performance are re lated only in the active takeover period, and conclude that takeover a ctivity affects the intensity of managerial discipline.