Top Management Turnover On The Corporate Performance

The basic characteristic of modern corporate governance is the separation of two rights, namely the separation of ownership and management rights. Separation of ownership and management of the company enhances the efficiency of governance, it also creates a problem that Principal-shareholders will be granted management rights of enterprises-the entrusted party, corporate business management may be based on the principle of self-interest, increasing job consumption, rather than to carry out the goal of maximizing shareholder value, this is principal-agent problem pointed out by Jensen and Meckling (1976). Many modern corporate governance theory to mitigate principal-agent problem, such as mergers and acquisitions, proxy contests, equity incentive, Shleifer and Vishny (1986) pointed out that supervised institutional investors is also an important one. When the listed company's management did not work hard or lack of capacity institutional investors decide to safeguard their own interests, they can use their voting power to influence the company's management, the company's managemen may need to restructure or replace failed executives. So, whether executives can enhance the performance of listed companies by changing them? What roles does institutional investors when executive changes? This paper studies from two aspects.In the empirical part of this article, this paper first uses parameters and non-parametric method to test effects of four executives of these different types of changes on corporate performance. We find that:(1) When this paper uses ROS and ROA to measure the first year of the short-term market performance and operating performance after the changes of executives of listed companies, former executives of listed companies will leave non-normally, the source of successor executive will not affect market performance and operating performance after the changes of executives; any of the current normal departure, the source of the successor will not have a significant impact on the market performance of listed companies, but the external successor operating performance was significantly stronger than the internal succession of operating performance.(2) When this paper uses ROS and ROA to measure the third year of the long-term market performance and operating performance after the changes of executives of listed companies, the source of successor does not affect the operating results and the market performance of normal and abnormal changes of executives.(3)When the type of executives change is former normal departure and successor comes from the company, compared with the executives' change of that year, this type of executive changes will significantly reduce the company's long and short-term business performance, but did not have a significantly impact on company's long and short-term market performance. When the type of executives change is former normal departure and successor comes from outside of company, this type of executive changes will not have significantly impact on operating performance, market performance and turnover former. When the type of former executives leave irregularly and his successor comes from the company, short-term market performance executives has improved significantly after the change of executives. Other forms of executive changes have limited impact on corporate performance.Next, according to the Proud (1988) hypothesis of institutional investors' efficiency monitoring, the paper continued to examine the corporate governance role in pressure-resistance institutional investors and pressure-sensitive institutional investors in the occurred of various executive changes, we found that:(1) When the type of executives change is former normal departure and successor comes from the company after the changes of executives of listed companies, the type of pressure-resistance institutional shares of listed companies significantly reduce the short-term market performance, especially in the short-term market performance of state-owned enterprises, which confirmed the hypothesis of negative oversight institutional investors; the impact on listed companies of short-term financial performance and long-term market performance are not significant, which is in line with the ineffective supervision hypothesis of institutional investors. The impact of pressure-sensitive institutional investors on short-term, operating performance, market performance and long-term market performance are not obvious after the changes of executives, confirming the hypothesis of invalid oversight institutional investors.(2) When the type of executives change is former normal departure and successor comes from outside of company, the type of pressure-resistance institutional investors and pressure-sensitive institutional investors cannot draw firm conclusions about the role of corporate governance.(3) When the type of former executives leave irregularly and successor comes from the company after the changes of executives of listed companies, the impact of pressure-resistance institutional investors on short-term financial performance is not significant after the changes of executives, but significantly reduced short-term market performance of private enterprises and enhance the long-term financial performance of state-owned enterprises and private enterprises. Pressure-sensitive institutional investors on corporate financial performance does not exert significant influence(4) When the type of former executives leave irregularly and successor comes from outside of company after the changes of executives of listed companies, the impact of pressure-resistance institutional investors and pressure-sensitive institutional investors cannot draw firm conclusions about the role of corporate governance.The contribution of paper is to use the improving of performance of listed company after changes of executives as viewing angle, and combining executives' departure intention with the sources of successor executives to study the impact on corporate performance of different types of executives change, also this paper takes the impact of institutional investors into account to analyze the role of different types of institutional investors among four different executives change, which verified the Proud (1988) hypothesis of institutional investors' efficiency monitoring.