A Study On Top Management Turnover And Its Economic Consequences

Business strategy is a general term used to denote the measures,action policies,schemes and competition methods adopted by enterprises in certain operating environments to achieve their objectives. Business strategy is of great significance to the development of an enterprise,as it is related to corporate operating performance and is also a key factor in competitiveness improvement. According to the theory of top management hierarchy,top executives of different characters may exert obvious effects on corporate behaviors and corporate decision-making. Therefore, top management turnover is usually deemed as a pivotal strategic decision for a company. Corporate executives not only serve as the framers of corporate operating strategies,but also have decisive roles on the implementation of these strategies. The impacts of top management turnover on the internal environment of a company are remarkable. Top management turnover that happens in different situations may have different impacts on an enterprise’s internal environment.Research in this study will focus on the changes in corporate operating strategies that each kind of turnover will bring about as well as the corresponding changes in corporate operating performance.Based on the research focuses, this paper will combine normative research and empirical research to verify the correlation between top management turnover and the results of operating strategy adjustment. At the first stage, this paper presents an analysis of the correlation between top management turnover and the operating performance after operating strategy adjustment and then proposes its research hypothesis.Then by selecting all A share listed companies in Shanghai and Shenzhen Stock Exchange from 2009 to 2013 as the study samples,this paper—with the help of descriptive statistic, factor analysis and multiple regression analysis—conducts an in-depth analysis and study into the impacts of top management turnover factors on the results of operating strategy adjustment.It is found in the research that poor operation performance is significantly correlated to the occurrence of corporate top management turnover; the turnover of chairman and general manager does not improve corporate operating performance, but worsens corporate financial situation; business performance doesn’t start to increase until one year after the turnover and the change magnitude of the business performance is much sharper than those without topmanagement turnover. In the second year after top management turnover, business performance is still on the rise. But in the third year after the turnover, operating performance doesn’t have evident correlation with top management turnover.In terms of the difference in turnover position, this paper finds that the change of general manager has relatively more obvious impacts on the near future of a company,while the change of chairman has longer impacts on business performance.For enterprises where the positions of chairman and general manager are undertaken by the same person,unlike other companies,their business performance starts to rise in the same year when position turnover happens. We also find that compared with the conventional changes,executives of irregular change can bring more negative impact to the company’s operating performance significantly; Both external and internal successors will bring negative correlation, but relative to the external successor,internal successor will bring the more negative effect.On the basis of empirical research,this paper proposes its own policy suggestions to improve the inefficient investment of listed companies from such aspects as perfecting the appointment & removal mechanisms of senior executives, improving the information disclosure mechanism for top management turnover, and establishing a sound market of managers in China. In this paper,the research results hold certain guidance significance for enriching the study scope of top management turnover and corporate operation performance,for improving a company’s internal governance,and for elevating overall corporate values.