Governance with multiple objectives : evidence from top executive turnover in China
Document Type
Journal article
Source Publication
Journal of Corporate Finance
Publication Date
4-1-2009
Volume
15
Issue
2
First Page
230
Last Page
244
Publisher
Elsevier BV
Keywords
Managerial turnovers, Multiple firm objectives, Firm performance, State ownership
Abstract
We examine the relationship between Chief Executive Officer (CEO) turnover and the performance of listed Chinese firms and obtain two results. First, we find a negative relationship between the level of pre-turnover profitability and CEO turnover when firms are incurring financial losses, but no such relationship when they are making profits. Second, there is an improvement in post-turnover profitability in loss-making firms, but no such improvement in profit-making firms. These results indicate the existence of a time-varying objective function, whereby shareholders have a greater incentive to discipline their CEOs on the basis of financial performance when their firms are incurring financial losses rather than profits.
DOI
10.1016/j.jcorpfin.2008.10.003
Print ISSN
09291199
E-ISSN
18726313
Funding Information
This work acknowledge the financial support from the Hong Kong Research Grants Council (RGC) Competitive Earmarked Research Grant Awards 2004–2005 (LU7236/04H).
Publisher Statement
Copyright © 2008 Elsevier B.V.
Access to external full text or publisher's version may require subscription.
Full-text Version
Publisher’s Version
Language
English
Recommended Citation
Chang, E. C., & Wong, S. M. L. (2009). Governance with multiple objectives: Evidence from top executive turnover in China. Journal of Corporate Finance, 15(2), 230-244. doi: 10.1016/j.jcorpfin.2008.10.003