Firm Performance, Governance Structure, and Top Management Turnover in a Transitional Economy

Firth, Michael; Fung, Peter M.Y.; Rui, Oliver M.

doi:10.2139/ssrn.711543

Cited by 20 publications

(32 citation statements)

References 26 publications

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“…The same is true about the relation between state ownership and executive turnover. Some studies find it to be negative (Pi & Lowe, 2011; Shen & Lin, 2009; You & Du, 2012), but others find it to be insignificant (Chang & Wong, 2009; Firth, Fung, & Rui, 2006b). There is also evidence that state ownership is not significantly related to board structure such as independence, size, or board meeting frequency (Chen & Al-Najjar, 2012; Ding et al, 2010).…”

Section: Results: Corporate Governance Mechanisms Of Listed Firmsmentioning

confidence: 99%

“…Such a perception is corroborated by empirical findings. Although some studies find board independence to relate positively to executive turnover (Firth et al, 2006b; Lau, Fan, Young, & Wu, 2007; You & Du, 2012) and negatively to expropriation (Shan, 2013), earnings management (Liu & Lu, 2007), and financial fraud (Chen et al, 2006), most studies find it to be insignificant in executive compensation (Chen et al, 2010, 2011; Conyon & He, 2011, 2012; Markoczy et al, 2013), strategic decisions (Chen & Cheng, 2007; Jia & Zhang, 2011; Li, Wright, & Scholes, 2010; Wu et al, 2011; Yeh et al, 2009), financial fraud (Ding et al, 2010; Firth et al, 2011; Huyghebaert & Wang, 2012; Jia et al, 2009), or firm performance (Du, 2013; Gang, 2007; Hu et al, 2010; Li & Naughton, 2007; Shen & Lin, 2009; Tian & Lau, 2001; Xu, Zeng, & Zhang, 2011).…”

Section: Results: Corporate Governance Mechanisms Of Listed Firmsmentioning

confidence: 99%

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Empirical Research on Corporate Governance in China: A Review and New Directions for the Future

2015

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The ownership structure of Chinese firms has experienced significant changes over the last three decades, including the development of a fast growing stock market through which a large number of domestic firms have become publicly traded corporations. These changes have drawn increasing attention from researchers of corporate governance. In this article, we review the empirical research on corporate governance in China, with a focus on the internal and external governance mechanisms that have been investigated and the findings about the effectiveness of these mechanisms. On the basis of our review of 132 studies, we summarize the major findings and discuss the limitation of agency theory in understanding the governance issue in Chinese firms. We offer several ideas (e.g., the importance of the social context, new conceptualization of governance, different outcomes of governance, and data/method issues) for a new agenda to guide future research in the corporate governance of firms operating in the Chinese and other emerging economy contexts.

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Section: Results: Corporate Governance Mechanisms Of Listed Firmsmentioning

confidence: 99%

Section: Results: Corporate Governance Mechanisms Of Listed Firmsmentioning

confidence: 99%

Empirical Research on Corporate Governance in China: A Review and New Directions for the Future

2015

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“…As a result, incumbent management is often replaced following a change in the controlling shareholder. Indeed, Firth, Fung, and Rui (2002) report that management turnover in Chinese PLCs was negatively related to firms' financial performance during the period 1998 through 2000. Therefore, we argue that the indirect costs of financial distress may motivate managers in firms with high leverage to insure their assets.…”

Section: A Leverage and Property Insurancementioning

confidence: 99%

“…Using the market-to-book value ratio as a growth proxy can be problematical in China given that about two-thirds of shares held by the State and some institutional investors are not publicly tradable and the nascent Chinese stock markets tend to be very volatile. The use of other growth measures like research and development (R&D) expenditures is also precluded by the lack of data.16 We focus on managerial ordinary (common) stock ownership because equity-option plans are currently undeveloped in China (e.g., seeFirth et al (2002)). …”

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confidence: 99%

Debt Capacity, Cost of Debt, and Corporate Insurance

Zou¹,

Adams²

2008

J. Financ. Quant. Anal.

124

110

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Using a unique insurance dataset for a sample of Chinese publicly listed companies for the period 1997 through 2003, this study tests the simultaneous linkages between debt capacity, cost of debt, and corporate property insurance. Our results suggest that, on the one hand, a higher cost of debt appears to motivate the use of more property insurance, but high leverage alone does not lead to the purchase of more property insurance. The latter finding might reflect the unique institutional setting of China, for example, where there is a low chanceof legally enforced company liquidation. Also, there is evidence that leverage can interact with tangible assets intensity and exert a positive conjoint effect on the corporate purchase ofproperty insurance. On the other hand, we find evidence that supports that property insurance helps expand insuring firms' debt capacity and helps lower their borrowing costs. However, themoderate evidence on the cost reduction effect suggests that lowering the borrowing cost is likely to be a concern secondary to facilitating corporate borrowing and thereby expanding debt capacity in corporate property insurance decisions in China. Overall, we conclude that debt capacity, cost of debt, and corporate insurance appear to be simultaneously related.

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“…In about 75% of the cases, the CEO is replaced when there is a change in the controlling shareholder; the turnover is higher for private transfers (79%) than for state transfers (73%). The rate of CEO turnover is much higher than normal; Firth, Fung, and Rui (2006b) calculate the normal turnover rate for Chinese firms to be 34% (and this rate is quite high by international standards). The short tenure of the CEO is a function of many things.…”

Section: Sources Of Improvement In Operating Performancementioning

confidence: 99%

Control Transfers, Privatization, and Corporate Performance: Efficiency Gains in China's Listed Companies

Chen

Firth²,

et al. 2008

J. Financ. Quant. Anal.

Self Cite

185

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We investigate performance effects for China's listed firms when there is a change in the controlling shareholder. These changes include ownership transfers from one state entity to another state entity and from a state entity to a private entity. We find positive performance effects when control is passed to a private entity. In contrast, when the transfer is made to another branch of the state, there is little change in performance. The stock market responds positively to a change in control, with the largest effect observed for private transfers. Our results suggest the Chinese government should continue to sell down its share ownership in listed firms as the transfer of control to private owners enhances corporate profitability and efficiency. Moreover, to help ownership reform, China should encourage an active market for corporate control.

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Firm Performance, Governance Structure, and Top Management Turnover in a Transitional Economy

Cited by 20 publications

References 26 publications

Empirical Research on Corporate Governance in China: A Review and New Directions for the Future

Empirical Research on Corporate Governance in China: A Review and New Directions for the Future

Debt Capacity, Cost of Debt, and Corporate Insurance

Control Transfers, Privatization, and Corporate Performance: Efficiency Gains in China's Listed Companies

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