An Empirical Research On The Selection And Turnover Of Financial Executives

Principal-agent problem, of which the central dilemma is how to get the agent to act in the best interests of the principal, is the key of corporate governance. In a principal-agent relationship, the selection, motivation and monitor of senior management are very important. A rational selection procedure and an effective labour market are the important precondition, while motivation and monitor of managers are critical factors of an effective corporate governance mechanism. Management turnover is an important component of corporate governance mechanism. An effective corporate governance mechanism can help to evaluate manager's performance and change unqualified managers.This paper utilized data of companies listed in Chinese Shanghai and Shenzhen Stock Exchange. An empirical study is conducted to find if there is difference in job setting, selection and turnover of financial executives between companies of different ownerships. This paper concludes the unique characteristics in China's corporate governance and gives suggestions on how to improve China's corporate governance.This paper has several important findings: In state-owned enterprises, financial executives play a relatively weak role in corporate governance. Company performance, board size, chairman of the board being CEO, audit opinion, and financial executive qualifications are factors that affect turnover of financial executives. Independent board directors and minor shareholders do not significantly affect turnover of financial executives. Empirical study also finds that in state-owned enterprises, the turnover-performance link of financial executives is less sensitive. It is concluded that government has multiple targets and policy burdens other than firm performance, which negatively affect China's corporate governance mechanism.