We analyze top executive turnover and its relationship to outside directors and firm performance in Japanese manufacturing companies. A semiparametric survival analysis reveals that the turnover probability has negative correlation with firm performance and that the hazard function has two peaks that can be decomposed by the degree of managerial shareholdings. Firm performance has significant negative effects on the turnover probability, even among firms with large managerial shareholdings and long tenure of top executives. On the other hand, outside directors or directors from banking sectors exert little effects on the hazard. These findings are consistent with a model by Fama (1980) applied to an economy with less developed managerial labor markets.
