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Volume 29 Number 2 December 2004
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Top Management Turnover: An Analysis of Active Australian Investment Managers |
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David R. Gallagher Prashanthi Nadarajah
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Abstract |
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This study examines the relationship between top management turnover (i.e.
investment directors) and investment performance for actively managed Australian
funds. This issue is significant given the importance of executive management in the
implementation of the institution's investment strategy, the sizeable assets under their
control, as well as the overall success and profitability of the funds management
operation. In addition, investors, asset consultants, managed fund ratings agencies
and the financial media devote significant resources to the scrutiny of performance,
the organizational activities, leadership and human capital of investment management
firms. Accordingly, this study examines the impact of performance and fund flow
activity on top management turnover in both the pre-and-post replacement period.
The research documents that turnover of underperforming investment managers
results in significantly higher performance in the post-replacement period, while
turnover coinciding with outperforming managers delivers investors significantly
lower returns. The evidence also identifies significant changes in portfolio risk
associated with managerial turnover. Finally, this research documents that
underperforming investment managers exhibit significantly lower fund flows prior to
replacement.
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Keywords |
| INVESTMENT MANAGERS; FUND PERFORMANCE; TURNOVER; FUND FLOW |
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Contact Details
David R. Gallagher
Prashanthi Nadarajah
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