Politická ekonomie
Politická ekonomie
Prague Economic Papers
University of Economics, Prague

Prague Economic Papers Vol. 26 No. 6

Financial Distress and Managerial Turnover: The Case of the Republic of Serbia

DOI: https://doi.org/10.18267/j.pep.628

[full text (PDF)]

Dragana Radjen, Nemanja Stanisic

This study examines the influence of financial distress on top management turnover in the Republic of Serbia over the period January 2009–June 2015. Using a sample of 86 large and medium-sized privately owned companies that adopted a reorganisation plan in bankruptcy, we found out that top management was changed in 33 companies. A logistic regression provides evidence that probability of top management turnover is significantly correlated with the company’s size (positive correlation) and the ownership concentration (negative correlation). The influence of the company’s financial performance, applied bankruptcy proceedings and debt monitoring of top management turnover was deemed to be statistically insignificant (at 5% and 10% significance level). Obtained results provide the proof that corporate governance mechanisms in distressed Serbian companies are not efficient.

Keywords: bankruptcy, distress, top management turnover

JEL Classification: G33, G34

References:

Balsmeier, B., Czarnitzki, D. (2010). Ownership Concentration, Institutional Development and Firm Performance in Central and Eastern Europe. ZEW Discussion Paper No. 10-096. https://doi.org/10.2139/ssrn.1739752.

Cerovic, S., Stanisic, N., Radojevic, T., Radovic, N. (2014). The Impact of Ownership Structure on Corporate Performance in Transitional Economies. Amfiteatru Economic, 17(38),

441–454.

Eckbo, B. E., Thorburn, K. S., Wang, W. (2012). How Costly Is Corporate Bankruptcy for the CEO? Tuck School of Business Working Paper No. 2012–109.

Eriksson, T. (2005). Managerial Pay and Executive Turnover in the Czech and

Slovak Republics. The Economics of Transition, 13(4), 659–677.

https://doi.org/0.1111/j.0967-0750.2005.00236.x.

Evans, J. H., Luo, S., Nagaraja, N. J. (2014). CEO Turnover, Financial Distress and Contractual Innovations. The Accounting Review, 89(3), 959–990. https://doi.org/10.2308/accr-50688.

Fang, Y, Hasan, I. Marton, K. (2011). Bank Efficiency in South-Eastern Europe. Economics

of Transition, 19(3), 495–520. https://doi.org/10.1111/j.1468-0351.2011.00420.x.

Firth, M., Fung, P. M., Rui, O. M. (2006). Firm Performance, Governance Structure, and Top

Management Turnover in a Transitional Economy. Journal of Management Studies, 43(6),

1289–1330. https://doi.org/10.1111/j.1467-6486.2006.00621.x.

Franks, J., Mayer, C. (2001). Ownership and Control of German Corporations. Review of Financial Studies, 14(4), 943–977. https://doi.org/10.1093/rfs/14.4.943.

Franks, J., Mayer, C., Renneboog, L. (2001). Who Disciplines Management in Poorly Performing Firms? Journal of Financial Intermediation, 10(3–4), 209–248. https://doi.org/10.1006/jfin.2001.0317.

Gilson, S. C. (1989). Management Turnover and Financial Distress. Journal of Financial

Economics, 25(2), 241–262. https://doi.org/10.1016/0304-405x(89)90083-4.

________ (1990). Bankruptcy, Boards, Banks and Blockholders. Journal of Financial Economics, 27(2), 355–387. https://doi.org/10.1016/0304-405x(90)90060-d.

Hotchkiss, E. S. (1995). Postbankruptcy Performance and Management Turnover. The Journal

of Finance, 50(1), 3–21. https://doi.org/10.1111/j.1540-6261.1995.tb05165.x

Hu, F., Leung. S. C. M. (2012). Top Management Turnover, Firm Performance and Government

Control: Evidence from China’s Listed State-Owned Enterprises. The International Journal

of Accounting, 47(2), 235–262. https://doi.org/10.1016/j.intacc.2012.03.006.

Jostarndt, P., Sautner, Z. (2008). Financial Distress, Corporate Control and Management

Turnover. Journal of Banking and Finance, 32(10), 2188–2204. https://doi.org/10.1016/j.

jbankfin.2007.12.040.

LoPucki, L. M., Whitford, W. C. (1993a). Patterns in the Bankruptcy Reorganisation of Large Publicly Held Companies. Carnell Law Review, 78(4), 597–618.

__________ (1993b). Corporate Governance in the Bankruptcy Reorganisations of Large,

Publicly Held Companies. University of Pennsylvania Law Review, 141(3), 669–800.

https://doi.org/10.2307/3312444.

Peduzzi, P. Concato, J., Kemper, E., Holford, T. R., Feinstein, A. R. (1996). A Simulation Study of the Number of Events per Variable in Logistic Regression Analysis. Journal of Clinical Epidemiology, 49(2), 1373–1379. https://doi.org/10.1016/s0895-4356(96)00236-3.

Radjen, D. (2015). The Analysis of the Effects of Financial Distress on the Top Management

in the Republic of Serbia. The European Journal of Applied Economics, 12(1), 19–25.

https://doi.org/10.5937/ejae12-7977.

Volpin, P. F. (2002). Governance with Poor Investor Protection: Evidence from Top Executive Turnover in Italy. Journal of Financial Economics, 64(1), 61–90. https://doi.org/10.1016/s0304-405x(02)00071-5.