Abstract
An involuntary CEO change is a significant event in a firm’s lifetime. This study examines whether forced CEO replacements improve firm performance through new acquisitions and auxiliary corporate strategies. We find CEO successors’ acquisitions to be associated with significantly higher shareholder gains relative to their predecessors and the average CEO. The post-turnover acquisition performance turnaround is more pronounced in the presence of greater board independence, hedge fund investors, and CEO experience. CEO successors also create sizeable shareholder value by reversing prior investments through asset disposals and discontinuing operations. Our evidence suggests that CEOs should be dismissed when they underperform.