Does CEO turnover matter in China? Evidence from the stock market
AbstractWe study the consequences of CEO turnover announcements on the stock prices of firms in China, where most listed firms remain majority-owned by the state. Our proposition is that state ownership may affect stock market reaction to CEO replacement because state-owned firms often pursue multiple, potentially contradictory, objectives, i.e. economic performance and social objectives. Applying standard event study methodology to a sample of 1,094 announcements from 2002 to 2010, we find that CEO turnover typically produces a positive stock market reaction. The reaction is significantly positive, however, only for enterprises owned by the central government, and not significant for enterprises owned by local governments or privately owned enterprises. These results suggest that a CEO turnover in a central state-owned enterprise signals a renewed commitment to the economic performance objective by state officials. The small size of CEO labor market suggests that other shareholders have a relatively small pool of CEO talent to proceed to managerial improvement when a CEO turnover takes place.
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Bibliographic InfoPaper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 21/2012.
Length: 31 pages
Date of creation: 24 Sep 2012
Date of revision:
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Postal: Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland
Phone: + 358 10 831 2268
Fax: + 358 10 831 2294
Web page: http://www.suomenpankki.fi/bofit_en/
More information through EDIRC
CEO turnover; corporate governance; state ownership; China; event study;
Find related papers by JEL classification:
- G30 - Financial Economics - - Corporate Finance and Governance - - - General
- M51 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Firm Employment Decisions; Promotions
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- P34 - Economic Systems - - Socialist Institutions and Their Transitions - - - Finance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-10-06 (All new papers)
- NEP-BEC-2012-10-06 (Business Economics)
- NEP-TRA-2012-10-06 (Transition Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Li, Hongbin & Meng, Lingsheng & Wang, Qian & Zhou, Li-An, 2008. "Political connections, financing and firm performance: Evidence from Chinese private firms," Journal of Development Economics, Elsevier, vol. 87(2), pages 283-299, October.
- Huang, Weihua & Schwienbacher, Armin & Zhao, Shan, 2012. "When bank loans are bad news: Evidence from market reactions to loan announcements under the risk of expropriation," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(2), pages 233-252.
- Volpin, Paolo, 2002. "Governance with Poor Investor Protection: Evidence from Top Executive Turnover in Italy," CEPR Discussion Papers 3229, C.E.P.R. Discussion Papers.
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