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

Eric C. Chang and Sonia M.L. Wong

Journal of Corporate Finance, 2009, vol. 15, issue 2, 230-244

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: Managerial; turnovers; Multiple; firm; objectives; Firm; performance; State; ownership (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (57)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:15:y:2009:i:2:p:230-244

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