| The CEO is the most influential center of power, who controls the organization to advance its objectives, and his personal success will be seen as the success of the company. However, in recent years, the CEO who is fired becomes more and more because of the bad performance in China. In this context, CEO turnover is very necessary to be researched. What is the relationship between the CEO turnover and the performance of companies finally? Based on the agency theory and the theory of internal control, we divided the CEO into the voluntary turnover and the involuntary turnover, using event study and statistical analysis method, as CEO turnover in listed companies main object to be the research job, and analyze the relationship between the performance and the results declared during the CEO turnover. I hope it will be helpful for us to understand the effects of the performance of listed companies and the stock market due to the CEO turnover in listed companies.Firstly, this paper managed to discuss the relationship between corporate performance and the CEO turnover. Most of the foreign scholars believed that the poor operation performance would lead to CEO turnover, but they did not get the agreement whether the performance of companies could get improvement through the declaration of the CEO turnover. The fundamental reason for the divergent views among researchers was that they used the different research methods, the selection of study, the main variables measured, and so the use of different statistical methods leaded to the different natural conclusion. To study the relationship between CEO turnover and the performance of companies, CEO must clarify the reasons for the turnover firstly because that not all the CEO turnover was related to the operation performance in listed companies. With the traditional perspective, this article divided the CEO turnover into two categories: voluntary turning and involuntary turning. Internal control system was used to achieve the interests of CEO and shareholders the same way, in which the board of directors play the most important role. The board of directors approval of these decisions and plays the manager of the company's conduct surveillance. As listed companies control market outside in our country was not perfect, this study was based on the internal control of the company only.On the basis of the conclusions in the literatures, I raised three assumptions based on the company's internal control theory:â‘ In accordance with agency theory ,those so-called involuntary turnover of the CEO suffered changed probably because its operating performance was not good, resulting in activation of the internal control mechanisms and making them subject to change fate. Therefore this paper showed that before the involuntary turnover, the company's operating performance should be relatively poor, resulting in the turnover of CEO;â‘¡In accordance with agency theory , involuntary turnover showed that this company's internal control mechanism was acted by poor performance and so the market should expect that new successor would be better than the performance of the past CEO, the market should think that he would improve the company's operating performance, or, at least, to the company's operating performance back to normal levels, then the market renewed confidence in the company, the reaction of the market was positive;â‘¢This paper thought that the CEO of poor performance was replaced, and the company's operating performance will be improved. Because the CEO of poor performance replaced, successor should contribute to the company's operating performance or at least the company's performance back to normal levels, otherwise the internal control mechanisms would be activated again, even a threat to the new CEO job security, we assumed the same theory with the common sense.I made a descriptive statistic from the chosen samples in the empirical part firstly; then used the case study to examine the CEO turning's impact on the stock market. The study found the whole samples had little effect on the stock market sample. Then I researched the effects from voluntary turning and involuntary turning and found that the voluntary turning did not bring the stock market a bad effect, because the market did not want to replace the excellent CEO, also did not know whether the CEO took over could as excellent as the former CEO. This brought to the stock market unease and uncertainty of the future performance. Involuntary CEO's turning is the focus of this paper. Because of the imperfect existence of external control and supervision mechanisms in our country, the supervision to the CEO depended on the internal control mechanism mainly, which was the supervision of the Board. The internal control mechanism will be activated when CEO did not act in the interests of seeking wealth or not maximize the shareholders'rights. Board would replace the poor performance of the CEO, meanwhile the market would regard the turnover as that the company could find a more suitable CEO. So the market could give a positive assessment for the CEO's involuntary turning. Use statistical analysis methods can be seen that in the involuntary turning of CEO before the company's operating performance was significantly below the industry average, but after the turning of the company's operating performance did not improve; the result was close to the vicious cycle theory. By regression analysis to examine the impact of accumulated extraordinary returns found that the company's growth opportunities, profitability had a negative correlation with the extraordinary cumulative before the turning. the more opportunities for growth, and stronger profitability of the turning, the market reflected negatively; the less growth opportunities and the weaker profitability of the turning, the market would give good feedback. The involuntary CEO turnover could have a positive impact on the stock market.From the study above, we could conclude that the board's internal control mechanism in the supervision of CEO was a certain effect. However, because of external control mechanism was still not perfect, so the CEO turnover has not improved the business performance. We should speed up the development of external control mechanism, with a common external control, to carry out effective supervision of the CEO.Companies should choose carefully successor after the past CEO, and successor could bring stability proceeds to the organization more effectively, and avoid another injury because of the CEO's turnover, and made the performance improved.For investors, in the event of involuntary turnover of CEO, the performance had not improved; therefore, investors should pay attention to the development of its performance for these companies of involuntary turnover of CEO. |
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