Study For Motivation And Effects Of Executive Resignation In Listed Company

The Growth Enterprise Market(GEM) is an essential part of our capital market and the successful GEM will provide the small and medium enterprises with a convenient financing platform, which will promote the development of innovative enterprises and application of the modern corporate system in these enterprises. However, because our country is still in transition economies, the defect of laws and regulations lead to the immature of GEM. The incomplete market institution has caused high price-earnings ratio, high issue prices and large amount of funds in GEM. What’s more, most enterprises in GEM have implemented the equity incentive policy for the top managers. But the defects of equity incentive policy prompt executives to resign in order to cash their equity. Therefore there is a phenomenon that a large amount of executives resign in GEM. In context of the intensive resignations in the Growth Enterprise Market, this paper studies the executives’ motivation for their resignations, the characteristics of these firms and the market effect caused by these resignations. We find that the executives in firms with overvalued stock and low performance are inclined to resign and there are more resigned executives in family-related firms and firms with high issue fee. The Growth Enterprise Market responses negatively to the resignations and these resignations show a significant cashing effect. Our study provides direct evidences to improve the growth enterprise market.