What do boards consider in CEO performance evaluation? Evidence from executive turnover

This study investigates whether CEOs are rewarded for actively making changes. We construct a comprehensive executive dataset from SEC filings and use non-CEO executive turnover to proxy for changes. We find that after executive turnovers, CEOs are less likely to be dismissed, and the change is not temporary. In addition, firm performance improves after executive turnovers. The results suggest that when boards of directors evaluate CEOs, they consider whether CEOs can overcome inertia and initiate changes.