Theoretical And Empirical Study On CEO Turnover Of Quoted Companies In China

CEO turnover is one of the most important decisions by board of directors. It is also a core issue in the field of corporate governance. In other point of view, CEO turnover is a good manner of keep CEO’s behavior within bounds and corporations running steady. Since the1990s, our companies have gone through large-scale reform of corporation system and most of them have been listed and competitive. In this process, CEO turnover may bring about good influence. The management experience of CEO is crucial for listed companies. Even it will result in whether the company can have vast development space in future. Once the incident of CEO turnover happens, all the shareholders, directors, custom, suppliers, staff and the public, will give their whole attention.This paper mainly demonstrates two major decisions based on the theory model of Meg A. Sato(2008). It provides a theory on how corporate board determines this two decisions regarding CEO turnover. One is board monitoring level, the other one is CEO succession policy. There is a potential reason why boards are reluctant to have CEO turnover. The board consists of a CEO, outside directors, and inside directors. Although the two types of directors have different incentives about becoming the next CEO, when all the incumbent board members jointly make these decisions, they agree to minimaize the amount which will be paid to the future newcomer, the higher is the pay the incumbent board members receive in the future. The model can explain why a less talented inside director is often promoted to the post of CEO even there is a better candidate outside the board. Moreover, it can explain why the board tends to produce weak monitoring and hardly fires CEO. After the theory model proved, the paper tests the main conclusion under empirical research method based on data of CSMAR.After the introduction and literature summarizing, both the board monitoring level and CEO succession policy are chief viewpoints. There is an important hypothesis in this paper. That is the hypothesis that the grounds the board making decisions are the future payoff and loss. So in the first section of3rd chapter, the main task is the definition of the loss and the amount of loss, and the analysis and the significance of loss model. Then the paper solves the Nash bargaining in order to make the decision progress of boards clearly and gets the expected objective and payoff of the different roles. The basic conclusions of this theory model are made soon afterwards. In the chapter four, the conclusions above are tested according to the data of our Chinese listed companies. In fact, some of the conclusions are matching the reality of Chinese listed, but some are not.Empirical research method is the chief method in this paper. This study provides empirical support for the theory model which consists of board monitoring level and CEO succession policy. Besides, the trend of inner promotion and the succession source also is tested. All of this may help us understand the reality of our listed companies better and will help the boards make excellent dicisions.