How Has CEO Turnover Changed?

We study CEO turnover – both internal (board driven) and external (through takeover and bankruptcy) – from 1992 to 2007 for a sample of large US companies. Annual CEO turnover is higher than that estimated in previous studies over earlier periods. Turnover is 15.8% from 1992 to 2007, implying an average tenure as CEO of less than 7 years. In the more recent period since 2000, total CEO turnover increases to 16.8%, implying an average tenure of less than 6 years. Internal turnover is significantly related to three components of firm stock performance – performance relative to industry, industry performance relative to the overall market, and the performance of the overall stock market. The relations are stronger in the more recent period since 2000. We find similar patterns for both forced and unforced turnover, suggesting that some, if not most, turnover labeled as unforced is actually not voluntary. The turnover‐performance sensitivity is modestly related to block shareholder ownership and board independence.

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