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Communication within Firms: Evidence from CEO Turnovers

By: Stephen Michael Impink, Andrea Prat and Raffaella Sadun
  • Format:Electronic
  • | Language:English
  • | Pages:64
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Abstract

This paper uses novel, firm-level communication measures derived from communications metadata several months before and after a CEO transition for 102 firms to study whether and how this organizational event is reflected in employees’ communication flows. We find that CEO turnover is associated with an initial decrease in intra-firm communication (-10% relative to the pre-CEO transition period), followed by a significant increase approximately five months after the CEO turnover (+33%). The increase in communications is driven primarily by interdepartmental (i.e. communication involving employees of different functional departments) and vertical (i.e. communication among managers and employees) communication flows. Firms where the medium-run increase in communication is higher experience greater increases in market returns and revenues in the year following the CEO transition.

Keywords

CEO Turnover; Management Succession; Organizations; Communication; Transition

Citation

Impink, Stephen Michael, Andrea Prat, and Raffaella Sadun. "Communication within Firms: Evidence from CEO Turnovers." NBER Working Paper Series, No. 29042, July 2021. (Revised September 2022.)

About The Author

Raffaella Sadun

Strategy
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