Title

Sales maximization or profit maximization? How state shareholders discipline their CEOs in China

Document Type

Journal article

Source Publication

Asia-Pacific Journal of Financial Studies

Publication Date

6-1-2012

Volume

41

Issue

3

First Page

347

Last Page

375

Keywords

China's listed firms, Managerial monitoring, State ownership

Abstract

This study examines the determinants of Chief Executive Officer (CEO) turnover in Chinese state-owned firms. Based on a sample of 1 555 turnover cases among listed firms in China during the period 1999-2003, we obtain three main results. First, CEO turnover is negatively related to the sales performance but not the profitability of the core business. Second, the negative relationship between CEO turnover and sales is stronger for firms with excessive employment and higher organizational slack. Third, there is a significant post-turnover increase in sales but a decline in profitability of the core business. Overall, our evidence suggests that state shareholders put a greater emphasis on sales generation than on profitability when they monitor their CEOs.

DOI

10.1111/j.2041-6156.2012.01076.x

Print ISSN

20419945

E-ISSN

20416156

Publisher Statement

Copyright © 2012 Korean Securities Association

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Full-text Version

Publisher’s Version

Recommended Citation

Opper, S., Wong, S., & Yang, Y. (2012). Sales maximization or profit maximization? How state shareholders discipline their CEOs in China. Asia-Pacific Journal of Financial Studies, 41(3), 347-375. doi: 10.1111/j.2041-6156.2012.01076.x