| The research of succession planning for enterprises is still in the early stage of development in China.Except for a few large enterprises that have clearly formulated and implemented succession planning,many domestic enterprises are not familiar or even completely unfamiliar with succession planning,and lack a systematic and scientific succession training mechanism.Therefore,the enterprises often face the dilemma of choosing a favorable successor when the former CEO leaving post suddenly.The value and significance of succession planning lies in this.It reserves qualified and reliable succession candidates for the enterprise in advance,helps the enterprise to deal with the vacancy of key positions in a timely manner,and ensures the smooth transition of management personnel and avoids the phenomenon of senior management fault,which is conducive to reducing the hidden danger of CEO vacancy for the enterprise.According to the closing stock price on January 1,2014,Strategy and Consulting company conducted a survey of 2,500 listed companies with the largest market value in the world.The data showed that the turnover rate of Chinese CEO in 2014 was 15%,which jumped from the former bottom to the first in the world.The turnover rate of CEO has greatly increased,but most enterprises have not formulated a formal and effective succession plan.Therefore,when the former CEO suddenly resigned,enterprises have to appoint interim CEO to temporarily exert the CEO's authority,thus enterprises can maintain normal operation and extend the transition period to facilitate the company to find suitable formal CEO candidates.However,the research showed that the succession of temporary CEO could bring great business risks and uncertainties,and could have a negative impact on the future development of the company.Based on this,this paper mainly adopts the combination of financial index method,comparative analysis method and case study method,starting with the succession behavior of temporary CEO,combing the existing domestic and foreign research results,and taking Ningxia Qinglong Pipe Industry Co.,Ltd.(hereinafter referred to as “Qinglong Pipe Industry”)as an example to analyzes the succession process of interim CEO.Using the information asymmetry theory,management myopia theory,impression management theory and organizational behavior theory,this paper analyzes the succession source,succession motivation and key parts of behavior characteristics of interim CEO in Qinglong Pipe Industry.It delves into the whole process of Qinglong Pipe Industry from the sudden departure of the former CEO to the appointment of the interim CEO,and then to the smooth transition of the interim CEO.By analyzing the changes of earnings management degree,investment efficiency and merger efficiency before and after the succession of interim CEO of Qinglong Pipe Industry,I find that temporary succession has brought adverse economic consequences to the company.The conclusion of this study complements the research literature on abnormal change of senior executives and has important guiding significance for the implementation of succession plan in Chinese enterprises.First of all,this paper expounds the concept of temporary CEO,the role of temporary succession and succession mode,and the theoretical basis of this paper.Secondly,this article makes a detailed introduction and in-depth analysis of the case from three parts: the background of the case company,the motivation for Qinglong Pipe Industry to employ interim CEO,the process from succession to confirmation and the behavioral characteristics during the temporary tenure.Thirdly,according to the industry,company size,and whether the CEO change three conditions during this period,screening with the Qinglong Pipe Industry to match the highest degree of the official CEO successor of the highest China Tungsten and Hightech Materials CO.,LTD(hereinafter referred to as “China Tungsten High-Tech Company”),and then the company's financial indicators of the two years before and after the CEO change were compared horizontally and vertically,in order to analysis the impact of temporary succession on the company.In detail,it analyzes the effect of temporary succession on the company's earnings management activities from the perspective of earnings management,and then it analyzes the company's earnings management methods.This paper analyzes the impact of temporary succession on the company's investment activities from the company's R&D investment density and investment efficiency.This paper analyzes the impact of temporary succession on merger and acquisition activities from: the frequency of merger and acquisition activities and the risk of goodwill impairment.Through the above analysis,this paper concludes that interim CEO's succession behavior could bring adverse economic consequences to the company.Specifically,temporary succession behavior could aggravate the earnings management degree of the company,which mainly using available-for-sale financial assets,pre-paid accounts and asset impairment reserves to carry out earnings reserves.Temporary succession behavior significantly reduces the company's R&D investment density and investment efficiency;Temporary succession reduces the frequency of mergers and acquisitions and increases the risk of goodwill impairment.According to this conclusion,some enlightenments on the formulation,implementation and improvement of succession plan are drawn.First,the company employs temporary CEO mainly because of insufficient succession plan.In view of negative impact of temporary succession on the company,the company should formulate a formal succession plan to avoid employing temporary CEO as much as possible.Second,if temporary succession is inevitable,the company should strengthen its internal supervision mechanism,improve the information disclosure system,reduce the operational space for self-profit behavior,and realize the goal of effective supervision and management.Third,the regulatory layer should also improve market services and supervision,rectify relevant laws and regulations in a targeted way,increase regulatory input and violation costs,and play a positive supervisory role on the benefit transmission behavior of the management of listed companies,so as to purify the overall economic environment.This conclusion provides a reference for other Chinese enterprises to make succession plans in the future. |
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