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Governance with multiple objectives: Evidence from top executive turnover in China

  • Chang, Eric C.
  • Wong, Sonia M.L.
Registered author(s):

    We examine the relationship between Chief Executive Officer (CEO) turnover and the performance of listed Chinese firms and obtain two results. First, we find a negative relationship between the level of pre-turnover profitability and CEO turnover when firms are incurring financial losses, but no such relationship when they are making profits. Second, there is an improvement in post-turnover profitability in loss-making firms, but no such improvement in profit-making firms. These results indicate the existence of a time-varying objective function, whereby shareholders have a greater incentive to discipline their CEOs on the basis of financial performance when their firms are incurring financial losses rather than profits.

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    Article provided by Elsevier in its journal Journal of Corporate Finance.

    Volume (Year): 15 (2009)
    Issue (Month): 2 (April)
    Pages: 230-244

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    Handle: RePEc:eee:corfin:v:15:y:2009:i:2:p:230-244
    Contact details of provider: Web page: http://www.elsevier.com/locate/jcorpfin

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