Papers:
 

In this paper, I investigate whether CEO turnovers - forced, as well as voluntary - are accompanied by changes in firm performance, and whether governance provisions associated with managerial entrenchment affect these performance changes. Using data on CEO turnovers in the 800 largest U.S. companies occurring over the period 1980-2000, I present evidence that firms with entrenched CEOs exhibit significantly poorer performance in the year prior to forced turnover, and experience significantly larger performance improvements during the three years following forced turnover. More importantly, I show that these larger performance improvements are the result of improved management rather than reversion to the mean. This evidence provides strong support for the hypothesis that entrenchment hampers firm performance by protecting inferior CEOs.  

Firing is a common response to performance failure. I consider an adverse selection model of firing, whereby firms differ in their ability to identify the incompetent workers that cause failure and the market imperfectly observes firms' ability; consequently, firm value is based on reputation - an imperfect assessment of ability. In this context, I examine whether scapegoating, defined as random firing by a low-ability firm, can be an optimal, reputation-saving, value-maximizing strategy. I show that, in equilibrium, high-ability firms efficiently fire incompetent workers. In turn, low-ability firms scapegoat (pool with high-ability firms) with a probability that is increasing in reputation. From the market's perspective, scapegoating represents the likelihood that the firm is poorly informed. I show that the unconditional likelihood of scapegoating is non-monotonic in reputation, while the conditional likelihood of scapegoating decreases in reputation.  

Technology adoption is one the most important elements of a firm's strategy. In this paper, we address an essential, yet largely overlooked, question in the literature: What should a firm do when faced with several alternative proprietary designs of a new technology? In our base case we assume there are two technology designs, each described by an independent stochastic process of technology evolution. We show that, in equilibrium, the buyer chooses the leading technology design as soon as the discounted payoff from doing so is positive. Early adoption occurs despite the fact there is an option value of waiting (and thus obtaining better information about the evolution of each technology design). In fact, any potential benefits from waiting and observing which technology design evolves faster would be taken away in the form of higher licensing fees. We consider a variety of extensions that allow us to evaluate the robustness of our "early adoption" result.