Empirical Study On The Relationships Among Corporate Control Transfer, Top Management Turnover And Firm Performance In China

In modern economics, corporate control market is the main area of the corporate governance research; top management turnover around the corporate control transfer gains a great attention as an important external disciplinary force. Through this mechanism, corporate control transfer of the inefficient managed firms (or firms in which non-value-maximizing behavior dominated) would result in the replacement of top management and lead to a more efficient use of resources. In western world, scholars give a lot of literatures in this area, whereas in China, based on the specific institutional background, the impact of Chinas'listed firms'corporate control transfer on the management probably fundamentally different from those of American cases. It may be expected that in the case where lacks an effective executive market and the management of the firms are mainly controlled by largest shareholders, it is not very possible for largest shareholders of China's listed firms to transfer or purchase corporate control for punishment of existing management (Sun and Li, 2003). In this means, it is very meaning to study the relationship between corporate control transfer and top management turnover.In this paper, we provide empirical evidence on the disciplinary role of corporate control transfer in China. Employing the turnover data of top managers between 1999 and 2003 and using several research methods such as T-test, Logistics regression, Chi-square test, nonparametric test, we find that the likelihood of top management turnover increases with poor pre-corporate control transfer performance, especially and mainly of the chairman.Corporate control transfer has some characters with the economic meaning that greatly influence the top management turnover probabilities. Based on China's specific institutional background an past research achievements, this paper narrows the focus to examine five characteristic variables that may be related to corporate performance and affect management turnover in order to further verify whether the correlation between management turnover and corporate performance is affected by these factors. We find that the disciplinary role of the Chinese market for corporate control is still, to some extent, subject to government intervention.