Economics at your fingertips  

Firm Performance, Governance Structure, and Top Management Turnover in a Transitional Economy*

Michael Firth, Peter M. Y. Fung and Oliver Rui

Journal of Management Studies, 2006, vol. 43, issue 6, 1289-1330

Abstract: abstract Recent research has argued that political and regulatory environments have a significant impact on corporate governance systems. In particular, countries with poor investor protection laws and weak law enforcement have low levels of corporate governance that manifests itself in substandard financial performance, management entrenchment, and the expropriation of minority shareholders. One implication of this research is that China will have poor corporate governance and entrenched managers as its legal system is relatively underdeveloped and inefficient. However, using data on top management turnover in China's listed firms, our results refute the prediction of entrenched management. We find evidence of very high turnover of company chairmen and there are many cases that we interpret to be forced departures. Our results show that chairman turnover is related to a firm's profitability but not to its stock returns. Turnover‐performance sensitivity is higher if legal entities are major shareholders but the proportion of non‐executive directors perversely affects it. We find no evidence that profitability improves after a change in chairman and this suggests that a firm's governance structure is ineffective as it is unable to recruit suitable replacements that can turn around its financial performance.

Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (54) Track citations by RSS feed

Downloads: (external link)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from
http://www.blackwell ... s.asp?ref=00022-2380

Access Statistics for this article

Journal of Management Studies is currently edited by Timothy Clark, Steven W. Floyd and Mike Wright

More articles in Journal of Management Studies from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().

Page updated 2020-10-25
Handle: RePEc:bla:jomstd:v:43:y:2006:i:6:p:1289-1330