Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

Study Identifies Causes of Executive Turnover after M&As

18.11.2009
Pre-merger performance and the nature of merger negotiations are among the key indicators of long-term leadership instability in target companies following mergers and acquisitions, according to a Virginia Commonwealth University study in the Journal of Business Strategy.

The study, “Brain Drain: Why Top Management Bolts After M&As,” analyzes factors that can lead to abnormally high turnover rates among target company executives – turnover that may continue for 10 or more years after the acquisition.

The new research examines a range of factors that can promote long-term leadership instability such as merger characteristics, the nature of merger negotiations, growth and profitability of the target company, headquarters location of the acquirer – whether foreign or domestic – and the foreign investment experience of the acquirer.

“Most firms involved in merger integration understand the importance of reestablishing an effective top management team after an acquisition,” said Jeffrey A. Krug, Ph.D., associate professor of strategic management in the VCU School of Business and author of the study, which appears in Vol. 30, issue 6, November/December issue of the journal. “However, few firms understand the causes of long-term executive turnover after a deal and how to manage it.”

Among Krug’s findings:

- The nature of merger negotiations is especially critical. Unfriendly negotiations, for instance, “create ill feelings among incumbent executives that often spill over to executives who join the firm years later.”
- Poor performance in target companies before an acquisition foreshadows higher-than-normal executive turnover rates that can last 10 or more years after a deal. This suggests that poor performance and leadership instability can become embedded in a firm’s culture. Improving performance in the firm becomes a difficult task for an acquirer when such leadership instability exists.

- Cross-border transactions slow the integration process. Foreign acquirers tend to take the first two years following the deal to observe the target’s operations before initiating major strategic changes; domestic acquirers move more quickly.

“Brain Drain” follows Krug’s 2008 study, “The Big Exit: Executive Churn in the Wake of M&As,” also published in the Journal of Business Strategy (Vol. 29, Issue 4, July/August 2008). This study analyzed patterns of target company executive turnover in more than 1,000 firms and demonstrated that many mergers and acquisitions destroy leadership continuity in target companies’ top management teams for at least a decade following the deal.

Complete copies of both “The Big Exit” and “Brain Drain” are available at http://www.emeraldinsight.com/jbs.htm, the web site of the Journal of Business Strategy, published by Emerald Group Publishing Limited.

About VCU and the VCU Medical Center: Virginia Commonwealth University is the largest university in Virginia with national and international rankings in sponsored research. Located on two downtown campuses in Richmond, VCU enrolls 32,000 students in 205 certificate and degree programs in the arts, sciences and humanities. Sixty-five of the programs are unique in Virginia, many of them crossing the disciplines of VCU’s 15 schools and one college. MCV Hospitals and the health sciences schools of Virginia Commonwealth University compose the VCU Medical Center, one of the nation’s leading academic medical centers. For more, see www.vcu.edu.

About Emerald: Established in 1967, Emerald Group Publishing is the world’s leading publisher of management research. In total, Emerald publishes over 700 titles, comprising 200 journals, over 300 books and more than 200 book series as well as an extensive range of online products and services. Emerald is both COUNTER and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. Emerald Management Plus is the largest, most comprehensive collection of peer reviewed management journals and online support for students, managers and researchers. With "Research you can use” as a publishing philosophy, the collection provides scholarly research that is both rigorous and relevant, with practical implications for professionals outside the academic world. For busy managers in corporate, federal and public organizations, Emerald Management First is an award-winning online knowledge and information resource.

Tom Gresham | Newswise Science News
Further information:
http://www.vcu.edu

More articles from Business and Finance:

nachricht Frugal Innovations: when less is more
19.04.2017 | Fraunhofer-Institut für Arbeitswirtschaft und Organisation IAO

nachricht Europe's microtechnology industry is attuned to growth
10.03.2017 | IVAM Fachverband für Mikrotechnik

All articles from Business and Finance >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: A quantum walk of photons

Physicists from the University of Würzburg are capable of generating identical looking single light particles at the push of a button. Two new studies now demonstrate the potential this method holds.

The quantum computer has fuelled the imagination of scientists for decades: It is based on fundamentally different phenomena than a conventional computer....

Im Focus: Turmoil in sluggish electrons’ existence

An international team of physicists has monitored the scattering behaviour of electrons in a non-conducting material in real-time. Their insights could be beneficial for radiotherapy.

We can refer to electrons in non-conducting materials as ‘sluggish’. Typically, they remain fixed in a location, deep inside an atomic composite. It is hence...

Im Focus: Wafer-thin Magnetic Materials Developed for Future Quantum Technologies

Two-dimensional magnetic structures are regarded as a promising material for new types of data storage, since the magnetic properties of individual molecular building blocks can be investigated and modified. For the first time, researchers have now produced a wafer-thin ferrimagnet, in which molecules with different magnetic centers arrange themselves on a gold surface to form a checkerboard pattern. Scientists at the Swiss Nanoscience Institute at the University of Basel and the Paul Scherrer Institute published their findings in the journal Nature Communications.

Ferrimagnets are composed of two centers which are magnetized at different strengths and point in opposing directions. Two-dimensional, quasi-flat ferrimagnets...

Im Focus: World's thinnest hologram paves path to new 3-D world

Nano-hologram paves way for integration of 3-D holography into everyday electronics

An Australian-Chinese research team has created the world's thinnest hologram, paving the way towards the integration of 3D holography into everyday...

Im Focus: Using graphene to create quantum bits

In the race to produce a quantum computer, a number of projects are seeking a way to create quantum bits -- or qubits -- that are stable, meaning they are not much affected by changes in their environment. This normally needs highly nonlinear non-dissipative elements capable of functioning at very low temperatures.

In pursuit of this goal, researchers at EPFL's Laboratory of Photonics and Quantum Measurements LPQM (STI/SB), have investigated a nonlinear graphene-based...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

Marine Conservation: IASS Contributes to UN Ocean Conference in New York on 5-9 June

24.05.2017 | Event News

AWK Aachen Machine Tool Colloquium 2017: Internet of Production for Agile Enterprises

23.05.2017 | Event News

Dortmund MST Conference presents Individualized Healthcare Solutions with micro and nanotechnology

22.05.2017 | Event News

 
Latest News

Physicists discover mechanism behind granular capillary effect

24.05.2017 | Physics and Astronomy

Measured for the first time: Direction of light waves changed by quantum effect

24.05.2017 | Physics and Astronomy

Marine Conservation: IASS Contributes to UN Ocean Conference in New York on 5-9 June

24.05.2017 | Event News

VideoLinks
B2B-VideoLinks
More VideoLinks >>>