We study CEO turnover - both internal (board driven) and external (through takeover and bankruptcy) - from 1992 to 2004 for a sample of large U.S. companies. Annual CEO turnover is much higher than that estimated in previous studies over earlier periods. Turnover is 15.0% from 1992 to 2004, implying an average tenure as CEO of less than seven years. In the more recent period since 1998, total CEO turnover increases to 16.6%, implying an average tenure of roughly 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. The relation of internal turnover to performance intensifies after 1997 in that turnover after 1998 is more strongly related to all three measures of performance in the contemporaneous year. External turnover is also related to all three measures of performance over the entire sample period, but there is not a sharp difference between the two sub-periods. We discuss the implications of these finding for various issues in corporate governance.
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