Academic journal article International Journal of Sport Finance

Managerial Turnover and Subsequent Firm Performance: Evidence from Danish Soccer Teams

Academic journal article International Journal of Sport Finance

Managerial Turnover and Subsequent Firm Performance: Evidence from Danish Soccer Teams

Article excerpt

Introduction

In recent years it has become increasingly popular to exploit the rich data available from sporting contests to obtain insights about important questions within business, finance, and economics. One question, which has been studied extensively using data from primarily soccer teams, is whether managerial turnover affects firm performance. But as in the more traditional literature in finance (e.g., Khanna & Poulsen, 1995; Weisbach, 1988) no clear consensus has been reached thus far.

The majority of researchers find that forcing management turnover has no positive effect on firm performance. That is, soccer teams do not win more matches following a dismissal of the coach. Balduck and Buelens (2007) use data from Belgian soccer and construct two groups of teams who performed similarly on the pitch, but only teams in one group changed their coach. It is then found that any difference in performance following a coaching change is due to regression to the mean. Bruinshoofd and ter Weel (2003) and Koning (2003) find identical results using Dutch data. More recently, van Ours and van Tuijl (2014) use data from betting markets to measure "surprise performance" as actual team performance adjusted for market expectations. They then match Dutch teams that fired their coach with teams that performed similarly, in terms of surprise performance, and find that coaching changes have no effect on performance. Audas et al. (2002) estimate an ordered probit model and find that English teams that changed their coach on average underperform relative to other teams. Using similar approaches, Flores et al. (2012) obtain the same result for Argentinian teams while Wirl and Sagmeister (2008) find that coaching changes do not affect the performances of Austrian teams. De Paola and Scoppa (2012) also use an ordered probit model, combined with nearest neighbor matching, and find no effect on Italian teams.

Some studies have, though, found improved team performance following coaching changes. González-Gómez et al. (2011) apply a data envelopment analysis to Spanish data and find that teams that made a coaching change mid-season perform better as a result, though they continue to underperform compared to teams that did not make a coaching change. Also for Spanish teams, Tena and Forrest (2007) distinguish between performance in home and away matches. Their results suggest that coaching changes affect performance asymmetrically, as teams obtain more points when playing at home while they are unaffected when playing away following dismissals. Tena and Forrest note that this is consistent with home crowds affecting the outcomes of matches because coaches are likely to be dismissed in situations where performance has been poor, implying that the morale of, and thus also support from, home supporters could be low. Scapegoating the coach could then be productive. This is not because it changes anything within the locker room, but because it rejuvenates the fan base, which, in turn, improves performance in matches played at home because players are inspired by greater vocal support and overall enthusiasm from fans. However, Tena and Forrest note further that their results are based on only three seasons of data, and that the results may not generalize to lengthier periods. Others (e.g., De Paola and Scoppa, 2012; Flores et al., 2012; Wirl and Sagmeister, 2008) have tested home and away effects separately but have been unable to replicate the positive result for home matches. Finally, Hentschel et al. (2012) argue that coaching dismissals should affect performance only when a team's players have homogenous skill levels. Basically, the argument is that if players' skill levels differ a lot, then a new coach will simply select the same players as his predecessor and players will not have an incentive to exert more effort in order to impress the coach and secure playing time. Hentschel et al. confirm their hypothesis using individual subjective player grades awarded following each match in German soccer. …

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