Robust Models of CEO Turnover: New Evidence on Relative Performance Evaluation

Abstract

We examine the robustness of empirical models and findings concerning CEO turnover. We show that the sensitivity of turnover to abnormal firm performance is an extremely robust result. In contrast, evidence indicating a relation between turnover and industry performance is both weak and fragile. We show that small changes in turnover modeling choices can affect inferences in a large way. Our evidence casts substantial doubt on the hypothesis that there is a large industry performance component to turnover decisions. We use our findings to offer some general prescriptions for checking robustness results in CEO turnover research.

Keywords: CEO turnover, performance measurement, relative performance evaluation, industry performance

JEL Classification: G30, G31, G32