CEO turnover, firm performance and corporate governance: empirical evidence on Danish firms

This paper examines the relationship between the replacement of CEO's and corporate performance in Danish firms. We use a unique longitudinal data set to test the hypothesis that CEO turnover is inversely related to firm performance. Evidence is provided using several measures of corporate performance and corporate governance. The results are consistent with the principal-agent theory; The threat of turnover ensures that CEO's act in the interest of the shareholders. Moreover, the status of the chairman of the board and family ties within the management and ownership of the company strengthen the relationship between CEO turnover and firm performance. (C) 2002 Elsevier Science B.V. All rights reserved.