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 language | English |
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Pages (from-to) | 230-244 |
Number of pages | 15 |
Journal | Journal of Corporate Finance |
Volume | 15 |
Issue number | 2 |
DOIs | |
Publication status | Published - 1 Apr 2009 |
Keywords
- Firm performance
- Managerial turnovers
- Multiple firm objectives
- State ownership