Frequent CEO Turnover and Firm Performance: The Resilience Effect of Workforce Diversity

• Main Authors: KIM, Youngsang, JEONG, Sophia Soyoung, YIU, Daphne W., MOON, Jinhee.
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2020
• Subjects: Diversity; Resilience; CEO succession; CEO turnover; Firm performance; Asian Studies; Organizational Behavior and Theory; Strategic Management Policy
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/7340
• Institution: Singapore Management University

CEO turnover (or succession) is a critical event in an organization that influences organizational processes and performance. The objective of this study is to investigate whether workforce diversity (i.e., age, gender, and education-level diversity) might have a resilience effect on firm performance under the frequency of CEO turnover. Based on a sample of 409 Korean firms from 2010 to 2015, our results show that firms with more frequent CEO turnover have a lower firm performance. However, firms with more gender and education-level diversity could buffer the disruptive effect of frequent CEO turnover on firm performance to offer a benefit to the organization. Our theory and findings suggest that effectively managing diverse workforce can be a resilience factor in an uncertain organizational environment because diverse workforce has complementary skills and behaviors that can cope better with uncertainty and signals social inclusion of an organization, thus fostering a long-term exchange relationship. These findings contribute to the literature on CEO turnover (or succession) and diversity.