Communication within Firms: Evidence from CEO Turnovers
This paper uses novel, firm-level measures derived from communications metadata before and after a CEO transition in 102 firms to study if CEO turnover impacts employees’ communication flows. We find that CEO turnover leads to an initial decrease in intra-firm communication, followed by a significant increase approximately five months after the CEO change. The increase is driven primarily by vertical (i.e. manager to employee) communication. Greater increases in communication after CEO change are associated with greater increases in firm market returns.
We thank Iwan Barankay, Wouter Dessein, Robert Gibbons, Stephen Hansen, Mitch Hoffman, Adam Kleinbaum, Niko Matouschek, Meg Meyer, Antoinette Schoar, Toby Stuart, seminar participants at Columbia, and participants at the Spring 2021 NBER Organizational Economics, 2021 Strategy Science (HBS), 2021 Ghoshal (LBS) Conferences for insightful feedback. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
I, Raffaella Sadun, hereby declare that I have no relevant material or financial interests that relate to research described in the article entitled “Communication within Firms: Evidence from CEO Turnovers.”
I also declare that I have received funding for my research from:
- Harvard University
- Microsoft Corporation
- Sloan Foundation