How Has CEO Turnover Changed? Increasingly Performance Sensitive Boards and Increasingly Uneasy CEOS

35 Pages Posted: 21 Aug 2006 Last revised: 25 Jul 2010

Steven N. Kaplan

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Bernadette A. Minton

Ohio State University (OSU) - Department of Finance

Date Written: August 2006

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.

Suggested Citation

Kaplan, Steven N. and Minton, Bernadette A., How Has CEO Turnover Changed? Increasingly Performance Sensitive Boards and Increasingly Uneasy CEOS (August 2006). NBER Working Paper No. w12465. Available at SSRN: https://ssrn.com/abstract=924751

Steven Neil Kaplan (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-4513 (Phone)
773-702-0458 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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Bernadette A. Minton

Ohio State University (OSU) - Department of Finance ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States
614-688-3125 (Phone)
614-292-2359 (Fax)

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