Firm performance and CEO turnover in China: implications for Chinese equity markets and corporate governance

Deskripsi

This research brief examines the relationship between CEO turnover and firm performance in Chinese equity markets, highlighting implications for corporate governance reforms. A study by Kato and Long (2006) reveals that privately controlled firms exhibit a stronger performance-CEO turnover link than state-owned enterprises (SOEs), signaling progress in market-driven accountability. The presence of independent directors further strengthens this connection, while CEO duality (holding roles in controlling shareholder firms) weakens it. Despite reforms, China’s transition economy still faces challenges, including market volatility driven by speculation rather than fundamentals, and incomplete shareholder protection mechanisms. The findings underscore the need for deeper governance reforms—such as enhanced transparency and dividend policies—to align executive accountability with long-term investor interests in China’s evolving financial landscape.