Joshua R. Pierce

Promotions in the Internal and External Labor Market: Evidence from Professional Football Coaching Careers*

We study job movements of professional football coaches. The likelihood of an external promotion is strongly related to measures of individual performance and only weakly related to team performance. In contrast, the likelihood of an internal promotion is not related to individual performance. This difference arises from the process governing internal job openings, since openings are negatively related to performance. Conditional on the presence of an opening, promotion likelihood is increasing in individual performance. Relationships matter, as coaches are often hired and fired as a group. These findings have implications for several issues related to incentives and organizational design.

What Happens in Acquisitions? Evidence from Brand Ownership Changes and Advertising Investment

We study advertising at the brand level in a sample of corporate acquisitions. New owners display an elevated propensity to sharply cut advertising in acquired brands. This behavior is most pronounced in private equity transactions. When a buyers existing brands overlap with the acquired brands, aggregate advertising spending on the merged portfolio of brands tends to shift downward. Sharp advertising cuts are more likely to be observed when the old owner of the assets was investing at an elevated level and when the new owner has displayed past restraint in their investment spending activities. Combined buyer and seller abnormal returns are more positive in deals characterized by post-acquisition cuts in advertising, suggesting that these cuts often represent efficiency-enhancing cost savings.

Robust Models of CEO Turnover: New Evidence on Relative Performance Evaluation

We examine the robustness of empirical models of CEO turnover and revisit prominent findings in the literature regarding the CEO turnover-performance relation. We find that the procedure used to categorize turnover events and the method used to construct performance metrics can have large effects on model inferences. We show that common modeling choices have potentially serious shortcomings including (a) ignoring important information, (b) relying on information that may be systematically biased towards the hypothesis of interest, and (c) weighing extreme observations more heavily than the underlying theory would suggest. We identify a small set of robustness checks and model permutations that are likely to span the reasonable set in many turnover modeling contexts. Using these checks, we show that the widely documented significant sensitivity of CEO turnover to a firm’s abnormal stock performance is an extremely robust result. In contrast, the surprising recent evidence that CEO turnover depends on industry returns is fragile and non-robust, and in general there is no convincing evidence of an independent role of industry stock returns in predicting CEO turnover. We conclude that efforts to explain the general presence of an industry factor in turnover are misguided and that a simple efficient learning view of turnover with full relative performance evaluation is a reasonable description of the CEO turnover process.

Post-Merger Integration Duration and Leverage Dynamics of Mergers: Theory and Evidence

We introduce the concept of the post-merger integration duration (PMID) which is the time delay that it takes a merged entity to fully capture synergistic gains. Using a dynamic model, we examine the effects of this duration on acquiring firms’ financing behavior around mergers. When facing a longer PMID, acquiring firms optimally choose lower leverage prior to and at the time of a merger, and gradually levers up as the integration period nears completion. We hand collect a unique data set on the integration duration of mergers and provide strong empirical support for the model implications.

Business School Rankings and Business School Deans

We examine the relation between dean turnover and changes in rankings in a comprehensive sample of business schools with ranked MBA programs from 1990-2002. We find little evidence that dean departures are related to changes in a schools overall rank in the U.S. News & World Report rankings. However, dean turnover does appear to be elevated when a school drops in the Business Week rankings and when a school deteriorates on the placement dimension as measured by U.S. News & World Report. These results are significant in both a statistical and economic sense. Our findings suggest either that schools respond to changes in rankings or that rankings reflect information schools use in their personnel decisions.

Hiring Your Friends: Evidence from the Market for Financial Economists

We study connections in academic hiring in a sample of finance doctoral graduates. Departments hire individuals with school connections to other recently hired faculty at a significantly greater rate than is expected. Similarly, schools exhibit an elevated propensity to hire individuals with names that indicate a similar ethnic background to incumbent department members. School-connected hires tend to publish at a significantly higher rate than expected, a finding that is robust to a large number of model modifications and is stronger in more research-intensive departments. The evidence on school connections appears highly consistent with an employer information benefit from hiring based on school connections. Ethnic-connected hires tend to publish at lower-than-predicted rates when controlling for hiring-school characteristics, but this finding is not robust to the inclusion of hiring-school fixed effects. This evidence suggests that the possible information benefits of school-connected hiring do not immediately extend to other types of connections.

New Evidence on Managerial Labor Markets: An Analysis of CEO Retreads

We examine career outcomes of CEOs subsequent to turnover. CEOs often resurface after turnover, but they secure positions that are inferior to their prior posts. Success in the retread market is unrelated to prior employer performance and board composition. CEOs who were particularly attached to their prior employer tend to have the poorest subsequent job prospects. These results suggest a generally efficient CEO turnover process in which firms dismiss CEOs of low ability. As CEOs acquire specific human capital over time, their outside options and bargaining power appear to diminish, offering a potential explanation for the specialist CEO compensation discount.

Internal Vs. External Promotions: Evidence from Professional Football Coaching Careers

We examine the job movements of professional football coaches both within and across employers and compare the mechanisms governing internal and external promotions. We find that the likelihood of an external promotion is strongly related to individual performance measures and only weakly related to team performance. In contrast to external promotions, we find that the overall likelihood of an internal promotion is unrelated to an individuals performance. This difference between internal and external labor markets appears to arise from the process governing job openings within the internal hierarchy, as the likelihood of an internal job opening up is negatively related to performance. Conditional on an internal opening occurring, we do find that increases in individual performance increase the probability of being promoted. Relationships matter a great deal in this labor market in the sense that coaches appear to be fired and hired as a group, suggesting that the value of an individual to an employer depends on the identity of the entire set of individuals who work together. We argue that our findings have implications for several issues related to incentives and organizational design.