If only I could sack you! Management turnover and performance in Great German Banks between 1874 and 1913

Abstract

We analyse the relation of firm performance and managerial turnover in 19th century German banking by probit estimation. This period covers a major reform of corporate governance. Before the reform performance and turnover were unrelated, whereas after the reform more successful managers left firms more seldom. However, only short-run performance matters in this turnover–success relationship.

Acknowledgements

We would like to thank Emir Dzinic for research assistance and the Deutsche Forschungsgemeinschaft for financial support. Part of the research for this article was conducted while Christian Bayer was Jean Monnet Fellow at the European University Instititute.

Notes

¹ See Guinnane (2002) for an overview of the history of the German banking system.

² Additionally, Huson et al. (2001) investigate whether this result is time invariant, splitting the period 1971 to 1994 in 4 subperiods. They find no significant change in the relationship of forced CEO turnover and firm performance.

³ A limitation of our data is ownership data being generally unavailable for 19th century Germany. However for modern Germany the influence of ownership structure is insignificant on managerial turnover (Kaplan, 1994b, p. 155).