Astudy On The Impact Of Stock Price Informativeness On The Top Executive Turnover

As an important human capital, executives impact on the company’s direction andbusiness objectives, and play an irreplaceable role on increasing value of the company.Therefore, it is very important for the company’s development to replace the executivesof low-grade with the ones having high management ability. However in China, theturnover of executives has been more frequent and the performance hasn’t beenimproved after changing executives, which have made companies lack effectiveness onchoosing executives. Therefore, it is required to study the turnover of executives forimproving the effectiveness of executive turnover mechanism.This article studies the impact of the stock price informativeness on the topexecutive turnover, which provides theoretical guidance for our listed companies abouthow to improve the effectiveness of executive turnover mechanism and enhanceenterprise value. Firstly, this article elaborates the basic theory in relevant to the stockprice informativeness and the top management turnover to provide theoretical supportfor the later; secondly, analyses the status of the stock price informativeness and thetop management turnover in China and points out the problems, and then analyses themechanism about the impact of the stock price informativeness on the top executiveturnover; finally, with the sample of the Chinese listed companies from2008to2009,carries out an empirical research by the use of the Logistic regression model. It isshows that:(1) the increment of stock price informativeness can increase thepossibility of executive turnover. The increment of stock price informativeness canreduce information asymmetry between the company’s owners and operators, andimprove the quality of the company’s information environment, which make theowners examine the behavior of executives more effectively and improve theeffectiveness of executive turnover mechanism.(2) The increment of stock priceinformativeness can weaken the negative relationship between executive turnover andaccounting performance. The increment of stock price informativeness leads to theincrement of information in the public market, which offers investors more informationabout the company. Since the accounting information are easier to be manipulated byexecutives, and when investors can get more useful information, they will not only dependent on accounting information.(3)These impacts on the chairman turnover arenot significant. Because of the lack of the perfect governance structure in the listedcompanies from China, the chairman controls of the company and keeps a goodrelationship with the controlling shareholder, general manager is only a deputy. Whenserious agency problems happen, the general manager will become a "scapegoat" asthe result of bad news.