Editorial Note

Using survey data from China, we demonstrate that the performance consequences of managerial turnover depend on firm characteristics and managerial ties outside of the firm. An insider CEO has better knowledge of the organization but may be bound by existing social ties within the firm. An outsider CEO may turn around the firm more efficiently and possess valuable business and political ties. The author finds outside CEOs are associated with higher efficiency gains in state-owned firms with a large labor force and dependent on government support. The finding is robust after controlling for the selection of CEOs.