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

Chang, Eric C.; Wong, Sonia M. L.

doi:10.1016/j.jcorpfin.2008.10.003

Cited by 151 publications

(129 citation statements)

References 59 publications

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“…Given that the listed firms in China are characterized by ownership concentration and the dominance of controlling shareholders, this agency argument may not apply because CEOs with duality may still have limited power over the large controlling shareholders who usually can decide whether to combine the CEO and board chair positions. The empirical evidence is largely consistent with this prediction, showing that duality does not decrease CEO turnover (Chang & Wong, 2009;Lau et al, 2007) or increase CEO compensation Conyon & He, 2011Markoczy et al, 2013). Other studies also find no evidence that duality increases financial fraud and earnings management (Chen et al, 2006;Firth et al, 2011;Liu & Lu, 2007;Yuan et al, 2008) or decreases firm performance (Huang & Zhao, 2008;Li & Naughton, 2007;Shen & Lin, 2009).…”

Section: Internal Mechanism: Boards Of Directorsmentioning

confidence: 77%

Empirical Research on Corporate Governance in China: A Review and New Directions for the Future

2015

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The ownership structure of Chinese firms has experienced significant changes over the last three decades, including the development of a fast growing stock market through which a large number of domestic firms have become publicly traded corporations. These changes have drawn increasing attention from researchers of corporate governance. In this article, we review the empirical research on corporate governance in China, with a focus on the internal and external governance mechanisms that have been investigated and the findings about the effectiveness of these mechanisms. On the basis of our review of 132 studies, we summarize the major findings and discuss the limitation of agency theory in understanding the governance issue in Chinese firms. We offer several ideas (e.g., the importance of the social context, new conceptualization of governance, different outcomes of governance, and data/method issues) for a new agenda to guide future research in the corporate governance of firms operating in the Chinese and other emerging economy contexts.

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Section: Internal Mechanism: Boards Of Directorsmentioning

confidence: 77%

Empirical Research on Corporate Governance in China: A Review and New Directions for the Future

2015

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“…To capture the effect of a CEO's political connections on turnoverperformance sensitivity, we include an interaction term between Political and performance measures in the explanatory variables. The control variables include firm size, leverage, CEO age, CEO tenure, CEO duality, board size, independent director ratio and managerial ownership, following existing studies (Chang and Wong, 2009). The regression also controls for firm and year fixed effects.…”

Section: Modelmentioning

confidence: 99%

“…While the first stage matching procedure uses historical performance, in the second stage regression, we are interested in the change of performance during CEO tenure, in the spirit of Chang and Wong (2009). The purpose here is to see whether an equal decline in performance leads to a difference in the likelihood of firing politically connected CEOs, compared to non-connected CEOs.…”

Section: Political Connections and Turnover-performance Sensitivity Umentioning

confidence: 99%

Political capital and CEO entrenchment: Evidence from CEO turnover in Chinese non-SOEs

Cao¹,

Pan

Qian

et al. 2017

Journal of Corporate Finance

115

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Previous theoretical and empirical studies suggest that CEOs' political connections are valuable to firms. We examine whether such connections become entrenched if the expected political capital fails to materialize and the firm lacks other types of political power. Using a sample of listed non-SOEs in China, we show that politically connected CEOs have a lower probability of turnover and cause a weaker turnover-performance sensitivity than non-politically connected CEOs. Further analyses show that these turnover patterns are not consistent with alternative explanations, such as superior managerial ability, being a member of controlling families or being promoted from the inside. The turnover patterns are less pronounced in firms with alternative political power, such as connected boards or being vital to the local economy. Following the turnover of politically connected CEOs, firm performance does not necessarily undergo significant improvement. Our results call for new theories that comprehend the real effects of political connections. AbstractPrevious theoretical and empirical studies suggest that CEOs' political connections are valuable to firms. We examine whether such connections become entrenched if the expected political capital fails to materialize and the firm lacks other types of political power. Using a sample of listed non-SOEs in China, we show that politically connected CEOs have a lower probability of turnover and cause a weaker turnover-performance sensitivity than non-politically connected CEOs. Further analyses show that these turnover patterns are not consistent with alternative explanations, such as superior managerial ability, being a member of controlling families or being promoted from the inside. The turnover patterns are less pronounced in firms with alternative political power, such as connected boards or being vital to the local economy. Following the turnover of politically connected CEOs, firm performance does not necessarily undergo significant improvement. Our results call for new theories that comprehend the real effects of political connections.JEL classifications: G32, G34, G38

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“…Hence, managers in big firms may accumulate more management experience. Chang & Wong (2009), Kato & Long (2006) and Firth et al (2006) found that managers in large firms are less likely to be forced to leave. We also found that managers in big firms are more likely to be promoted.…”

Section: Resultsmentioning

confidence: 99%

Staged Privatization: Transforming State-Owned Enterprises into Market-Based Firms

Jiang¹,

Wang²

2016

JITE

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Most privatizations around the world, especially in developed economies, are staged processes involving multiple stages of shares lockup and unlocking in the stock market.This paper proposes a theory on staged or step-by-step privatization. We show that such an approach is efficient, in the sense that it can successfully transform state-owned enterprises into efficient market-based firms. Our theory explains the popularity of staged privatizations around the world. We have also conducted empirical analysis, yielding supporting evidence for our theory.

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

Cited by 151 publications

References 59 publications

Empirical Research on Corporate Governance in China: A Review and New Directions for the Future

Empirical Research on Corporate Governance in China: A Review and New Directions for the Future

Political capital and CEO entrenchment: Evidence from CEO turnover in Chinese non-SOEs

Staged Privatization: Transforming State-Owned Enterprises into Market-Based Firms

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