The Correlational Research On Executive Turnover And Inefficient Investment From Chinese Listed Companies

Investment behavior is one of the important factors that determine the enterprise value. Executive staff play a key role in the formulation and implementation of investments decisions, and at some extent, they determine the enterprises investment efficiency. After the executive turnover events, whether the enterprise investment efficiency would be improved, this is the key question to this study. Out of this question, this paper will combine normative and empirical research methods, to explore the correlation between executive turnover and non-efficiency investment.First of all, by summarizing the classical theory and existing research, we studied the impact mechanism between executive changes and inefficient investment from the theoretical point of view, then proposed the research hypotheses. Secondly, choosing the listed companies’data from the year2006to year2012, through software SPSS19.0to process the data. We use the residual error which calculated by the model of Richardson to measure the investment efficiency. Then, by analyzing the results of descriptive statistics, pearson correlation coefficient and multiple regression, we study the relationship between executive turnover and non-efficiency investment. We found that no matter chairman changes or general manager changes, it can’t improve the companies’ investment decisions as we had expected, instead, it would lead to the decline of investment efficiency; The chairman informal turnover has a negative relationship with investment efficiency, and in the sample of overinvestment, the general manager’ informal turnover will also decrease the investment efficiency, but there is no significant effect in the underinvestment sample; For those overinvestment companies, as the extension of general manager’tenure, the company’s overinvestment phenomenon will become more seriously; There is a significantly negative correlation relationship between internal succession and the company’s investment efficiency; Chairman and general manager of one of the two-level has a positive impact on the improvement of non-efficiency investment.This paper based on the empirical results, proposed policy suggestions to improve investment efficiency, in terms of improving the executives to appoint of remove mechanism, the independent director system, information disclosure mechanism about executives turnover and establishing a perfect manager market. We think this study will fill the gap in the research fields of executive turnover and investment efficiency, and help to standardize the executive’s investment behavior, improve internal governance of the company, besides, it can offer some valuable guidances to enhance corporate value.