Top Management Turnover In Chinese Listed Corporation: Firm Performance Or Private Benefit Of Control

Top management turnover by controlling shareholder has always been concerned by the researchers of corporate governance in both theoretical and empirical area. Resent researches in this area are limited to test the relationship between firm performance and top executive turnover, and to study the role of controlling shareholder played in corporate governance. This paper not only study the relationship between firm performance and top executive turnover, but also empirically studies the relationship between the top executive turnover and private benefits of control, by testing the relationship between the control premium, related party transactions and top executive turnover. Using a sample of 227 top executive turnover after negotiated control block transactions occurring in China during the period 1998 to 2004, this research explorers the oversight and tunneling motivation behind top executive turnover. The new finding of this paper is that top management turnover after the transfer of control is effective, which show in other side that control takeover market play an important role in top manager oversight. However, top executive turnover after control takeover also show the motivation to grab private benefits of control by the controlling shareholder. Furthermore, it can be seen that the scale of related party transaction which help the controlling shareholder to extract private benefits became much larger after the top management turnover. After investigating the effects of several internal and external governance mechanisms, this paper demonstrates that the existence of independent board of directors, the existence of another large shareholder, creditors and the legal infrastructure of cross-list in B and H stock market play a minor role in China.