Short-Term Effects of Managerial Turnover on Performance and Effort: Evidence from the German Bundesliga

Abstract

Current research on (managerial) turnover mainly focuses on performance changes and is ambiguous with respect to the results. Yet, the literature agrees that short-term performance changes are induced by opposing effects. Specifically, a turnover leads to an information loss that might influence the staffing of positions negatively and incentives to exhibit effort positively. In order to identify the predominant effect and how it affects overall short-term performance, we employ a new measure of effort and different degrees of information loss. Therefore, we analyse within-season coach turnovers of professional soccer teams in the German Bundesliga, using a generalized version of the synthetic control method. In order to take into account low and high information loss, we differentiate between insider and outsider successors. Insiders might staff positions better while outsiders might be able to elicit higher effort. Our results are in line with these expectations: a turnover leads to an increase in players' effort, but only in case of an outsider coach, both, insider and outsider, improve performance.