A Study On The Order Of Executives' Turnover In Financial Violation

Corporate violation are often accompanied by a greater probability of CEO and CFO replacement.Hennes et al(2008)[1]found that 49%of CEOs and 64%of CFOs were replaced within six months before and after the declaration date of financial violation.This paper takes a sample of A-share listed companies who violated financial regulations from 2007 to 2017 in China.The data shows that from 2007 to 2017,there are 894 A-share listed companies in China had financial violations,21.59%of which replaced CEO and CFO successively within six months before and after the announcement of the violatio:n.Further statistics show that senior executives in different positions have significant differences in the order of departure.CFOs are likely to leave before CEOs in financial violation.This phenomenon has statistical significance,which is the factual basis of this paper.Previous studies mainly focused on whether senior executives changed when companies violated the rules,but did not involve the discussion of the order of senior executives'change.Based on the'background of corporate violations,this paper consists of three levels:theoretical analysis,model deduction and empirical test.It is the first time to study the order of senior executives' turnover and its internal mechanism,which is a good complement to the existing research..asThe main conclusions of this paper are follows:(1)There are significant differences in the turnover order of senior executives in different positions,and the proportion of CFO leaving early in financial violatlion is significantly higher than that of CEO;(2)When a company breaks financial rules,the difference of financial decision-making influence between CEO and CFO plays an intermediary role in the turnover order of executives.CFO's financial decision-making influence is stronger than CEO's.The early change of CFO in violation reflects the gradual improvement of corporate governance mechanism and power and responsibility allocation in China.To speak of the empirical method,this paper uses the intermediary effect test procedure proposed by Wen Zhonglin(2004)1.In the subsequent robustness test,we re-test the intermediary effect by changing the way of variable construction and Bootstrap method,which further confirms that the intermediary effect of financial decision-making influence on the turnover order of executives does exist.We believe that the establishment of a fair mechanism for the appointment and dismissal of senior executives is of great significance for improving the corporate governance structure and embodying fairness and efficiency.