The National Culture, Measured By Hofstede Indexes, Influence The Decision Of Ceo Turnover

1630 Words Jul 28th, 2016 7 Pages
Introduction

In this paper I examine how cross-sectional differences in the national culture, measured by Hofstede Indexes, influence the decision of CEO turnover. This is an essential question as the decision to replace the CEO of a firm, CEO turnover, is the most critical decision board members make during their tenure. CEO turnover is an important event which provides a corporation an opportunity to amend and revise its direction, leadership and policies. How this decision making process varies across countries?
Countries have different cultural characteristics which affect their corporate culture and some of these characteristics guide the decisions made by a firm, including the decision to replace a CEO. In this paper I study this question first through a general cross-sectional regression which includes cultural indexes. Furthermore, I use cross-listing as an event to study how the national culture affects the sensitivity of the CEO turnover to firm performance in difference in difference setting. To examine this, I study how the CEO turnover’s sensitivity to performance changes after cross-listing and how this change is linked to the national culture dimensions. The results suggest that cross-listing alters organizational culture in a way that cannot be explained by the legal bonding hypothesis. Legal bonding hypothesis claims that firms commit to a better legal system and corporate governance by cross-listing in the United States. However, the difference between…
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