An Empirical Study On Interlocking Directorates,CEO Turnover And Firm Performance

As the bridge of managers and shareholders,directorates have an impact on the corporate governance via its monitoring and management function.Especially,interlocking directorate,which has become a very common thing,need to be analyzed whether it can improve corporate governance efficiency.Secondly,CEO turnover is also a common phenomenon,which is regarded as a sign of efficient corporate governance.Usually,the firm is hoping to improve its performance by changing CEOs.Thus,in this essay,we are going to analyze the relation among interlocking directorates,CEO turnover and firm performance.On one hand,by using CEO turnover as a result to analyze whether interlocking directorates can improve corporate governance.On the other hand,by using performance improvement as the result to analyze whether CEO turnover is a sign of corporate governance efficiency.In the first part,we are going to analyze two common phenomenon,interlocking directorates and CEO turnover,and figure out the main factors that account for those phenomenon.We conclude that deficient corporate governance regime and current stage of economy and corporate development are the main reason to the phenomenon above.In the second part,we use logistics regression and multilinear regression to analyze our hypothesis.Two main conclusion can be made.Poor performance and larger interlocking directorates result in higher turnover rate of CEO.And as a sign of corporate governance efficiency,the firm performance can be improved by changing CEOs.Due to its advantages in information and resources,interlocking directorates can have better judge whether CEO need to be changed.The conclusions above,is a supplement to the interlocking directorates analysis in China,and also give advice on constituting the board and choosing directors.