Information effects of managerial turnover on effort and performance: Evidence from the German Bundesliga

Abstract

Managerial turnover induces an information loss regarding managers' knowledge about subordinates' abilities that might increase subordinates' incentives to exhibit effort to impress the new manager. To identify how this affects short-term performance, we analyze within-season coach turnovers in the German Bundesliga and consider low and high information loss by differentiating between insider and outsider successors. We use a generalized version of the synthetic control method to construct an accurate counterfactual scenario ensuring that results are not simply due to regression-to-the-mean. We find performance improvements for insider and outsider successors, but only outsider successors induce players to exhibit higher effort.