Research On Factors That Affect The CEOs Turnover In Chinese Listed Companies

In modern enterprises, CEO was employed to rule the company, and beresponsible for the strategy and performance. An excellent CEO will benefit thecompany and shareholders, instead a poor CEO will destroy the company and doharm to the interest of shareholders. The aim of corporate governance is to monitoringand inspiring the top management. Boards of directors are widely believed to play animportant role in corporate governance, in some extreme situations, the boards canand do fire the CEO at will. More important, the turnover of CEO is a critical index tojudge the efficiency of corporate governance mechanism. Therefore, we can find outthe problems in the governance mechanism in Chinese listed companies by analyzingthe factors influenced the turnover of CEO.Based on Principal-agent Theory, the dissertation empirically examines the CEOturnover of all companies which listed in Shanghai and Shenzhen Stock Exchangefrom2004-2011. By using logistic model, the dissertation examines the impact ofperformance, independent directors’ proportion, large shareholders and politicalconnections on the possibility of CEO turnover. The statistical analysis on the currentsituation of CEO turnover from2004to2011suggest that on average, there are16.23%of CEOs in listing companies of China were replaced. Besides, the main reasons forCEO departure were resignation and transferred. But several recent studies suggestthat poor performance leads to CEO departure. Using logistic model for furtheranalysis, the empirical result shows that the connection between performance andCEO departure is negative and significant. Which means in our country, poorperformance leads to CEO departure. In addition, independent directors’ proportion,large shareholders and political connections do not relate to CEO departure. Boards ofdirectors and shareholders are important internal control mechanisms, but their do notimpact on CEO departure, this result indicates that the corporate governancemechanism in our country isn’t efficiency.