FIRM PERFORMANCE, CORPORATE GOVERNANCE, AND TOP EXECUTIVE TURNOVER INJAPAN

We examine the role of corporate governance mechanisms during top exec utive turnover in Japanese corporations. Consistent with evidence from U.S. data, the likelihood of nonroutine turnover is significantly rel ated to industry-adjusted return on assets, excess stock returns, and negative operating income, but is not related to industry performance. The sensitivity of nonroutine turnover to earnings performance is hig her for firms with ties to a main bank than for firms without such tie s. Outside succession in Japan is more likely for firms with large sha reholders and a main bank relationship. We document performance improv ements subsequent to nonroutine turnover and outside succession.