Top Management Turnover, Firm Performance and Government Control: Evidence from China’s Listed State-Owned Enterprises

42 Pages Posted: 10 Jan 2010

See all articles by Fang Hu

Fang Hu

Griffith University - The Department of Accounting, Finance & Economics

Sidney Leung

City University of Hong Kong (CityUHK) - Department of Accountancy

Date Written: January 7, 2010

Abstract

Using a sample of 916 Chinese listed state-owned enterprises (SOEs) from 2001 to 2005, we find the likelihood of top management turnover is negatively associated with firm performance, suggesting the existence of an effective market-based corporate governance mechanism in an emerging economy that is highly controlled by government. We also find that the negative turnover-performance relationship is stronger when the SOE is held by central government, directly held by local government, holds a monopolistic position in local economy or in a strategic/regulated industry. The results indicate that the market-based corporate governance mechanism that punishes top executives as a result of poor performance is not only used in Chinese SOEs, but is more frequently used when the governance control of SOEs is more intensive. Our findings support the notion that government control strengthens rather than weakens the turnover-performance governance mechanism. Our additional analysis shows that this complementary effect persists in the regions lack of pro-market institutions such as investor protections and functioning capital market.

Keywords: management turnover, firm performance, government control, emerging market

JEL Classification: G30

Suggested Citation

Hu, Fang and Leung, Sidney, Top Management Turnover, Firm Performance and Government Control: Evidence from China’s Listed State-Owned Enterprises (January 7, 2010). Available at SSRN: https://ssrn.com/abstract=1532724 or http://dx.doi.org/10.2139/ssrn.1532724

Fang Hu (Contact Author)

Griffith University - The Department of Accounting, Finance & Economics ( email )

Nathan Queensland 4111
Australia
+61 7 3735 7559 (Phone)
+61 7 3735 3719 (Fax)

Sidney Leung

City University of Hong Kong (CityUHK) - Department of Accountancy ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong
China
+852 2788-7924 (Phone)
+852 2788-7944 (Fax)

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