Research On The Impact Of Corporate Governance On Top Management Turnover

A valid governance mechanism can ensure that when the company performs badly, it can change unfit top management, especially the chairmen of the boards and CEOs, who take charge of the companies. So we can find out problems in current governance mechanism by checking the relationship between the governance mechanism and the turnover of top management.Based on the principal-agent model, this dissertation empirically examines the top management turnover of listed companies in Shenzhen Stock Exchange in 2004. By using logistic model, the dissertation examines the impact of corporate governance mechanisms, including board of directors, large shareholders and managerial ownership and takeover market ,on the possibility of top management turnover. The findings show that the rate of top management turnover is about 24.92%, which is a bit higher than other countries. After further research, the results suggest that the boards fail to discipline top management with poor performance, while the shareholding structure, especially the rate of state-owned shares relates to the possibility of top management turnover, the other which can explain the possibility of top management turnover significantly is the takeover market.This dissertation also proposes some suggestions after analyzing the empirical results. Firstly we could enforce the boards by strengthening the independence of independent directors, adding meet times of the boards, separating the CEOs' duty from the chairmen of boards so on. Secondly, we should establish market for managers. Also we should establish takeover market. At last we could reform current shareholding structure, making it more complex and circulating, and reduce the rate of state-owned shares. At the end, an explanation on the limitations of the dissertation and some advices on further research are given.