Illegal Information Disclosure,Managerial Power And Top Management Turnover

With the improvement of information disclosure's quality and transparency,Company may catch the investors' attention and further have access to the capital easier,it can also help to prevent company's property being tunneled and it can further help to keep investors' interests from being violated.The quality of company's information disclosure is also closely related to the healthy operation and stability of the capital market.However,over the past 20 years,the phenomenon of illegal information disclosure is increasingly serious regardless of the regulation and law.Illegal information disclosure is a reputation-damaging event for the focal company,it can further result in some economic loss for the focal company,such as the increasing cost of accessibility to the capital,the negative fluctuation of focal company's stock price etc.what's worse,it can destroy the focal company,just as the saying goes,"It may take several years to build a reputation,but it can be smashed within just few hours".Illegal information disclosure can also leave outside a bad impression,it will further bring forth public's doubt about company's organization legitimacy,impose negative influence on corporate reputation,which further weaken investors' confidence and increase the difficulty of gaining investment in capital market.Based on the perspective of organizational reputation,this paper aims to study the relationship between illegal information disclosure and top management turnover.Empirical studies also indicate that sometimes the top management being replaced in the case of illegal information disclosure and sometimes it doesn't.is that a kind of board directors' failure or the effect of managerial entrenchment?Therefore,this paper further study whether managerial power play a role in entrenchment for the top management in the case of illegal information disclosure.Accordingly,two hypotheses have been raised in this paper:(1)CEO or Chairman,who are more likely being downgraded in the case of illegal information disclosure;(2)CEO or Chairman,who have a strong power,are less likely being replaced in the case of illegal information disclosure.Chinese listed state-owned companies during the period from 2007 to 2012 are selected from CSMAR database,in which 521 companies with illegal information disclosure being selected,another 521 companies without illegal information disclosure being match paired based on the same year,the same industry,the closely similar size,accumulated 1042 samples.By using Logistic regression model to conduct empirical studies,this paper concludes that:(1)Companies,which violate information disclosure regulations,have a higher top management turnover.(2)Board characteristics such as board director's independence can play an effective role in monitoring top management.(3)Strong power will have a managerial entrenchment effect for the top management in the case of violating information disclosure regulations.This paper selects CEO-Chairman duality,top management tenure,board size,independent board directors' ratio,top management's shareholding and the consistency of independent board directors' location with the company to composite a index to measure top management's power,the higher the composite number,the larger the effect of management entrenchment.This paper enriches existing studies related top management turnover to some degree,it also has some practical implications for the regulator,the companies and the public.However,this paper also has some limitation which can be studied in future studies:(1)This paper doesn't investigate the outcomes after top management being replaced;(2)This paper doesn't extract managerial power from corporate governance structure,due to the strong managerial power accompanies the weaken corporate governance institution.Future studies can investigate the interaction between managerial power and corporate governance institution in Chinese context.