CEO turnover, firm performance, and enterprise reform in China: Evidence from micro data

• Published in: Journal of Comparative Economics Vol. 34; no. 4; pp. 796 - 817
• Main Authors: Kato, Takao, Long, Cheryl
• Format: Journal Article
• Language: English
• Published: San Diego Elsevier Inc 01.12.2006; Elsevier; Elsevier BV
• Series: Journal of Comparative Economics
• Subjects: Business economics; CEO turnover; Chief executive officers; China; Corporate governance; Economic performance; Economic systems; Empirical research; Employee turnover; Enterprise reform; Enterprise resource planning; Executives; Financial performance; Firm performance; Labour turnover; Microeconomics; Senior management; Transition economies; Transitional economy; China; CEO turnover; G30; Transitional economy; Firm performance; G15; M52; J33; O53; M12; P34; Corporate governance; O16; China; Enterprise reform
• ISSN: 0147-5967; 1095-7227
• DOI: 10.1016/j.jce.2006.08.002

In this paper, we use unique data on China's listed firms from 1998 to 2002 to show that CEO turnover is significantly and inversely related to firm performance, although the magnitude of the relationship is modest. In addition, we find that this turnover-performance link is weaker for listed firms that are still controlled by the state and those that have a relatively weak non-state controlling shareholder. In contrast, the appointment of independent directors enhances the turnover-performance link. Moreover, the listing suspension mechanism, adopted by China's securities regulatory agency, appears to be effective in improving the turnover-performance tie. Finally, listed firms with CEOs holding additional positions among the controlling shareholders have a weaker turnover-performance link. Journal of Comparative Economics 34 (4) (2006) 796–817.