Working Paper: NBER ID: w12465
Authors: Steven N. Kaplan; Bernadette A. Minton
Abstract: We study CEO turnover - both internal (board driven) and external (through takeover and bankruptcy) - from 1992 to 2005 for a sample of large U.S. companies. Annual CEO turnover is higher than that estimated in previous studies over earlier periods. Turnover is 14.9% from 1992 to 2005, implying an average tenure as CEO of less than seven years. In the more recent period since 1998, total CEO turnover increases to 16.5%, implying an average tenure of just over six years. Internal turnover is significantly related to three components of firm performance - performance relative to industry, industry performance relative to the overall market, and the performance of the overall stock market. Also in the more recent period since 1998, the relation of internal turnover to performance is more strongly related to all three measures of performance in the contemporaneous year. External turnover is not significantly related to any of the measures of stock performance over the entire sample period, nor over the two sub-periods. We discuss the implications of these findings for various issues in corporate governance.
Keywords: CEO turnover; corporate governance; firm performance; board sensitivity
JEL Codes: G3; L2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| CEO turnover (M12) | firm performance relative to the industry (L25) |
| CEO turnover (M12) | industry performance relative to the market (L19) |
| CEO turnover (M12) | overall market performance (G10) |
| firm performance relative to the industry (L25) | CEO turnover (M12) |
| industry performance relative to the market (L19) | CEO turnover (M12) |
| overall market performance (G10) | CEO turnover (M12) |