A Study On The Relationship Between Manager Turnover And Corporate Governance Of Chinese Listed Companies

Turnover of top managers is an important content of corporate governance, and is a result that firm inner and outside governance mechanisms combinedly act. Just as Jensen & Warner (1988) said: "turnover of firm top managers is a key index understanding the variable restraining manager and judging the efficiency of corporate governance mechanism ". Effective corporate governance mechanism could be able to in time replace managers of low-grade achievement, but replace them with manager having higher management ability. In recent years, as Chinese bond market scales gradually, large amount of turnover events of top managers has happened. The frequently happening of top manager turnover has aroused the general public attention, especially the cause and effects of turnovers brought to firms. As the reprehensive of Chinese enterprises, the listed companies come from state-owned enterprises, having a lot of distinctive attributes, for example, they lack the main body with ultimate property right and so on. Although our firms have experienced a process of corporate system reforms for over 10 years, but the internal and external mechanism of corporate governance is still far from efficient, thus a phenomenon exists that "strong management and weak supervision". With the background of poor corporate governance, to how much extent does the turnover of top managers reflect our country's corporate governance? Is the turnover of top managers really good for improving the corporate governance quality of our country's listed companies? These issues deserve our careful exploration.So the paper has taken Chinese listed companies as object of study, and has carried out comparatively systematic research on the relation between governance mechanism and turnover of top managers. The paper has analyzed inside and outside factors affecting the turnover of top managers, and tested whether firm performance is really the true standard by which top managers are evaluated. On the basis of carrying out a sufficient study on the causes to the relevant conclusion, the paper has brought forward pertinent policy suggestion on how to improve the governance quality of Chinese listed companies by the turnover of top managers. The main body of the paper is basically as follows:1. Firstly the paper has systematically narrated the research content on the subject home and abroad, and has carded out the train of research thought and frame of the study. Scholars at home and abroad have basically carried out their study from the following aspects: firm performance, company's stock right structure, governance status of board of directors and board of supervisors , external governing mechanism (such as creditor's rights administers), the demographic characteristics of top managers (such as age, education level), successors' source, the effects of shareholder wealth aroused by turnover of top managers, the post stability of top management team(TMT)and financial pack behaviors and so on.2. The paper has carried out some theoretical analysis on turnover of top manager using relevant theories of management and economics, including transaction costs theory, property right theory, human capital theory, super- property right theory etc. by the retrospect of relevant theories, the paper argues that turnover is an ultimate means designed by consignor to restrain agents. Under separation circumstances of modern enterprises "two right", the enterprise consignor and the agent sign a contract, the agent is entrusted to management control. The contract stability is based on the fact that both sides are able to get their expectation efficacy as premise. The consignor will may adopt punishing measures to fire agent while agent's management control behavior has damaged consignor's benefit gravely, this is the final measure the consignor defends its self-interest.3. On the basis of digestion, induction and refinery to relevant theory, the main body of the paper draws the outline of the analytical framework from a perspective of corporate governance. The nature of turnover of managers is the transfer of firm management and control power between agents under the synthetic mechanism of inner and outside corporate governance. The corporate governance includes one set of excitation and restraint mechanism for manager personnel behavior, includes reward, controlling power, reputation and competitive forces of the market etc. Among them controlling power mechanism is basic, the most effective incentive mechanism. While other mechanism could not produce a marked effect effectively, or the enterprise manager is estimated that the ability is low or is not competent enough for management post, the enterprise owner will implement controlling constraint to manager, and will relieve the manager's management control power, meanwhile to hire other manager to manage the enterprise. Once the metastasis of controlling power happen, former manager will lose all relevant benefits to business administration position, whose reputation, human capital marketable value will suffer grave loss. The existence of loss makes threat to the managers. Therefore turnover of mangers is a method to stimulate and constrain mangers by realizing the transfer of the administration controlling power between managers.4. owing to the fact that present's research about turnover of firm managers is insufficient, the paper takes consignor (enterprise) and agent (operator) as two game participates, and has built a two period game model, describing the game process of the two participants, and found solutions to the model in different conditions. The paper argues that the turnover is the final outcome of the game between the two main bodies. From the moment that two sides sign a contract of employment, the two parties have started a dynamic game process. What holds together these game participants is the judgment through comparing the cost and benefits in game stages. If the consignor regards that present manager's administration ability is far from anticipation and it may find a right candidate to replace the present one, then probability that the present manager will be changed increase. Therefore turnover of top managers is the result that both sides end the contract.5. The paper did a statistical analysis on the current situation of turnover of top managers happening in the last few years, including relevant data such as the turnover quantity, cause, age of managers and successors' source, post independence character and so on. The analysis will provide a little fundamental description on the current situation of manager turnover in the listed companies, and provide a base of research material for later empirical study.6. On the bases of theoretical analysis in the previous part, using the latest data of listed companies whose largest stock holder remain unchanged, the paper carried out an empirical study on the relation between firm performance,governance structure and turnover. The test result shows that firm performance is an important reason for forced turnover of top managers, board of directors do not play its right role in corporate governance, on the contrary board of supervisors has brought its supervision into play but not to a large extent, and the creditor has harnessed its preliminary function of corporate governance. Finally based on the reason analysis, the paper gives out some pertinent policy and suggestions. 7. the paper takes the listed companies whose largest stock holder have changed in recent years as research samples, and carried out an empirical study on the relation between the transfer of controlling holder,firm performance and turnover of managers. the study result indicates that firm performance is negatively related to both the transfer of controlling stock-holder and manager turnover, and the share ration of the largest holder is also negatively related to the transfer of controlling holder, the reason of which is probably that the bigger the holding share of the first largest holder holds, the more difficult the transfer agreement will be to reach. The paper finally submitted pertinent suggestion on the basis of carrying out depth analysis of causes on the conclusion.8. On the consideration that the post of main managers and general managers may be closely connected the paper takes the listed company as research samples whose main managers have been replaced and studies the effects of main managers' turnover on the post stability of the whole top management team. The research conclusion demonstrates that different kinds of manager turnover would produce different effects on the post stability of the top management team. The paper also produces some relevant policy and suggestions finally.