The Impact Of Internal Control On Executive Change

Executives have special position and the function of management in the enterprise, so the public pay a lot of attention to them. In the recent years, the occurrence of the well-known listing corporation executive change events is frequently, producing certain effect to the enterprise itself and even the whole industry. This paper has made a statistics and analysis on the current status of executive changes of China’s listing corporation by the year of 2009-2012, and found that the executive change events in China’s listing corporation occur more frequently, and the reasons for change is more complex. Once the listing corporation executive turnover occurred, the reasons leading to turnover and the impact factors of the resource to successors are often in many aspects. Studies have found that the performance of the company and the corporate governance has important influence on executive changes, and internal control can improve the performance of the company and the corporate governance. Then, will the internal control have an impact on top executive changes? There is few literature on this issue presently, and the research on this problem is beneficial to provide a perspective to improve the internal control of the company, and ensure the distribution and the performance of the rights and obligations of each people in the company is according to the regulations, to build an effective system of supervision and control, and ensure the enterprise in making decisions for executive changes and the resource of successor is more reasonable and prudent.This paper divide the executive change into the executive turnover and the executive succession as two aspects according to the flow of events, and choose the different positions(for example the chairman of the board and the general manager) turnover and succession as the research object, to discuss respectively the level of internal control influence on the different position of executive turnover and succession. This paper is based on the theory of the principal agent theory and the incentive and restraint mechanism, combing the relevant research literature, found that the performance of the company and some factors of corporate governance such as the characteristics of the board, the proportion of management shareholding and the concurrent will influence the executive change, at the same time the company which have higher internal control level will have higher performance and corporate governance. Therefore, this article mainly proposed hypothesis aims at that the level of the company’s internal control would affect the occurrence and frequency of turnover, the resource of succession. And the establishment of the research model, using Logit regression to test the level of internal control influence on the turnover and succession, and using Ologit regression to test the level of internal control influence on the frequency of executive turnover.Through the analysis of the research found that, the turnover is negatively related to the performance of the company before the year of turnover, the worse the performance of the company is, the more likely lead to the occurrence of company executives turnover events; the turnover and the level of internal control is significantly negative correlation, the level of internal control and risk-control ability is lower, the more likely to lead to company executives turnover; turnover frequency and the level of internal control is significant negative correlation, the level of internal control is lower, the turnover frequency is higher; the manager’s resource from outside of succession and the level of internal control is negative correlation, the higher the level of internal control is, the more probably the manager’s resource from inside of succession. In addition, this study also find that, the turnover is significantly negative correlation to the firm size and the size of the board director members, the company is larger, and the board members more, the turnover will be less; the turnover is also has significant positive correlation to the proportion of the first shareholder, the company’s ability to growth; and the chairman of the board’s turnover has significant positive correlation to the SOE and two duty concurrent.