Diversification And CEO Dismissal:Empirical Analysis

Based on the separation of ownership and management of modern enterprise, the general manager is employed to rule the company. A good manager can help shareholders to achieve a maximum profit,whereas an incompetent manager may damage the interests of the shareholders. Because of the separation of ownership and management, The general manager and shareholders pursue different interests, shareholders pursue the maximization of enterprise value, and the main goal of general manager includes returns, leisure time and reducing the risk,general manager will seek benefits for itself,which also includes the stability of his position, and the diversification is considered as a probably effective method. The general manager can promote his human capital value by diversification, and also diversification makes the company’s organizational structure become complex, which may increase the difficulty for shareholders to assess performance, also may increase the difficulty of other manager to displace him.Based on the the Agency theory、Diversification motivation theory,I collected the data of Chinese listed manufacturing companies from 2007 to 2011 and read the related domestic and foreign literature. By using logistic model, In the control of the performance of the company, general manager of age, change of controlling shareholders, the ratio of general manager shareholding, whether two duty syncretic, the nature of the controlling shareholders, ownership concentration and executive pay, this passage investigate the relationship between diversified company and the turnover of the general manager.The empirical result shows diversification can not reduce the probability of CEO dismissal. But the change of the chairman of the board shows obvious effect of regulation on the connection between diversification and CEO dismissal, indicated that change of the chairman of the board reduces the supervision of the CEO.