Governance with multiple objectives : evidence from top executive turnover in China

Eric C. CHANG, Sonia Man-lai WONG

Research output: Journal PublicationsJournal Article (refereed)

48 Citations (Scopus)

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.
Original languageEnglish
Pages (from-to)230-244
Number of pages15
JournalJournal of Corporate Finance
Volume15
Issue number2
DOIs
Publication statusPublished - 1 Apr 2009

Fingerprint

Turnover
Governance
China
Executive turnover
Multiple objectives
Chief executive officer
Profit
Profitability
Financial performance
Chinese firms
Shareholders
Incentives
Objective function
Time-varying

Keywords

  • Firm performance
  • Managerial turnovers
  • Multiple firm objectives
  • State ownership

Cite this

@article{7288e047528b4e70ab0ad60ca4b9493e,
title = "Governance with multiple objectives : evidence from top executive turnover in China",
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.",
keywords = "Firm performance, Managerial turnovers, Multiple firm objectives, State ownership",
author = "CHANG, {Eric C.} and WONG, {Sonia Man-lai}",
year = "2009",
month = "4",
day = "1",
doi = "10.1016/j.jcorpfin.2008.10.003",
language = "English",
volume = "15",
pages = "230--244",
journal = "Journal of Corporate Finance",
issn = "0929-1199",
publisher = "Elsevier",
number = "2",

}

Governance with multiple objectives : evidence from top executive turnover in China. / CHANG, Eric C.; WONG, Sonia Man-lai.

In: Journal of Corporate Finance, Vol. 15, No. 2, 01.04.2009, p. 230-244.

Research output: Journal PublicationsJournal Article (refereed)

TY - JOUR

T1 - Governance with multiple objectives : evidence from top executive turnover in China

AU - CHANG, Eric C.

AU - WONG, Sonia Man-lai

PY - 2009/4/1

Y1 - 2009/4/1

N2 - 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.

AB - 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.

KW - Firm performance

KW - Managerial turnovers

KW - Multiple firm objectives

KW - State ownership

UR - http://commons.ln.edu.hk/sw_master/519

U2 - 10.1016/j.jcorpfin.2008.10.003

DO - 10.1016/j.jcorpfin.2008.10.003

M3 - Journal Article (refereed)

VL - 15

SP - 230

EP - 244

JO - Journal of Corporate Finance

JF - Journal of Corporate Finance

SN - 0929-1199

IS - 2

ER -