CEO Turnover and Firm Performance in China’s Listed Firms (CRI 2009-012)
Conyon, Martin; He, Lerong
Manuscript Type: Empirical Research Question/Issue: This study investigates the relation between CEO turnover and firm performance in China’s listed firms. The study examines how the sensitivity of CEO turnover to firm performance is moderated by the private control of firms, the presence of a majority shareholder and the presence of independent directors on the board. Research Findings/Insights: Using a panel of about 1200 Chinese firms per year from 1999 to 2006 we find significant changes in the ownership and control of firms. The private control of firms and the fraction of independent directors on the board have increased considerably over time. The study finds a significant negative association between CEO turnover and firm performance consistent with the agency model. There is evidence that the CEO turnover sensitivity for poor performance is greater in firms that are privately controlled, or have a majority shareholder, or have a greater fraction of independent directors on the board. Theoretical/Academic Implications: This study provides empirical support for the agency model and the importance of internal corporate governance to attenuate agency costs. It provides important insights into firm governance in transition economies. Practitioner/Policy Implications: This study offers insights to policy makers interested in enhancing the design of internal corporate governance within transition economies.
CEO-turnover; China; Corporate Governance