Monitoring managers : does it matter?

This paper investigates under what circumstances boards of directors fire CEOs and whether this action leads to better firm performance. We use unique and detailed data, covering 473 companies in the transition region, on boards’ actions, expectations and beliefs about CEO ability. We find that following forced CEO turnover, companies see performance improvements and that their investors are considerably more likely to eventually sell them at a profit. -- Corporate governance ; large shareholders ; boards of directors ; CEO turnover ; legal reforms ; transition economies ; private equity