Top Management Turnover, Firm Performance and Government Control: Evidence from China’s SOEs

Abstract

This paper examines a sample of 916 China's state-owned enterprises (SOEs) during 2001 - 2005 and finds a significantly inverse relationship between top management turnover and firm accounting performance in China's SOEs, suggesting that an effective method of corporate control, which tie top management turnover with poor firm performance, indeed exists in the Chinese political economy, which is a mixture of capitalism and socialism. We also find that the negative relationship between top management turnover and accounting performance is significantly stronger among SOEs with central government ownership and greater market power. There is no evidence that the relationship is affected by concentrated government ownership or whether the firms are in a strategic industry. Our findings have important implications on the method of corporate control adopted in SOE, especially, that high government control may enhance tight corporate control.