The  panorama of CEO turnover: an empirical study on Chinese listed  companies[1]

Yang  Zhejiang[2]  Fan Wei[3]

Chinese Academy of Personnel Science, Ministry of Personnel, P.R.C.,  100101, Beijing, China; School of Management, Zhejiang University, 310027,  Hangzhou, China.

Abstract:  In  this paper, we present a panorama of the Chinese listed companies’ CEO turnover.  We can see that from 2001 to 2004, top three industries about the number of CEO  turnover are Manufacturing, Mixed and Telecommunications industries; top three  industries about relative turnover rate are Media and culture,  Telecommunications and Mixed industries; job re-arrangement, resignation and  expiry of tenure are three mainly publish reasons; the difference between inside  and outside succession is not significant. A deep analysis showed that age,  education and tenure are will influence CEO turnover too.

Keywords:  Chinese  listed company; CEO turnover; inside succession; outside succession.  

1  INTRODUCTION

CEO turnover is one of the most important decisions for the development  of one corporation, such issue is widely researched by accounting and finance  researchers oversea. CEO turnover can influence a lot of aspects of the  corporation, Inside of the organization, it is the most influential management  change. Outside of the organization, it is a signal of the development of the  corporation for stakeholders, such as stokeholders, customers, suppliers ,  public and government. As a result, CEO turnover can influence economic,  political enviroment and corporation performance.

The structure of the paper is as follows. First, related background in  the area of corporate CEO turnover is discussed. Next the data and the applied  methodology are presented, followed by the empirical results of CEO turnovers.  Finally, the last section concludes.

2 METHODOLOGY

We constructed a data set by gathering information of CEO turnovers from  announcements submitted to the Shanghai and Shenzhen Stock Exchange and record  in CSMAR System (www.gtarsc.com) during the period 2001 to 2004. The total  sample consists of CEO turnovers from firms that meet the following three  criteria: (1) the firm is listed on the Shanghai and Shenzhen Stock Exchange;  (2) an announcement of resignation is submitted to the Shanghai and Shenzhen  Stock Exchange that identifies the reason and the date of actual turnover; (3)  the manager is the CEO.

3  EMPIRICAL RESULTS

3.1  Industrial distribution of CEO turnover

Table  1. Industrial distribution of CEO turnover during the period  2001-2004

Table1 provides statistics for the numbers of CEO turnovers, and the  percentage of industrial CEO turnover on all CEO turnover. The result show that  top three industries about the number of CEO turnover are Manufacturing, Mixed  and Telecommunications industries, the CEO turnover rate is 56.66 percent, 9.38  percent and 7.33 percent, respectively. But we can not suggest that the highest  industry about CEO turnover rate is Manufacturing. Because the number of  Manufacturing is very large. For example, the percentage of the number of  Manufacturing companies on all Chinese listed companies is 57.32 percent in  2004.

Table  2. The relative CEO turnover rate for each industry

1. Average number of CEO turnover means the average number of CEO  turnover per year during the period 2001 to 2004;

2. The number of listed companies in 2004 means the number of listed  companies in each industry in 2004;

3. Relative turnover rate means (Average number of CEO turnover)/ (The  number of listed companies in 2004).

Table2 provides statistics for the relative CEO turnover rate for each  industry during the period 2001 to 2004. The result show that top three  industries about relative turnover rate are Media and culture,  Telecommunications and Mixed industries, the relative CEO turnover rate is 30.00  percent, 27.35 percent and 26.80percent,  respectively.

3.2 The publish reasons of CEO turnover

Table3 provides statistics for the publish reasons of CEO turnover during  the period 2001 to 2004. The result show that the publish reasons are job  re-arrangement, retirement, expiry of tenure, resignation, personal reasons,  control change, fired, perfecting the administration structure of company legal  person, dual position is over, illegal, death/illness, no reason given and  other. A deep analysis show that job re-arrangement, resignation and expiry of  tenure are three mainly publish reasons, the rate is 31.54 percent, 22.30  percent, and 18.52 percent, respectively.

Table  3. The publish reasons of CEO turnover

3.3  The distribution of successor origin

Table4 provides statistics for the distribution of successor origin  during the period 2001 to 2004. The result show that inside successor rate is  49.01 percent; outside successor rate is 49.17 percent.  

Table  4. The distribution of successor origin

3.4  The age when the predecessor departures

Table  5. The age when the predecessor departures

Table5 provides statistics for the age when the predecessor departures,  and the distribution of CEO’s age for all listed companies. The result show that  (1) take the listed companies with CEO turnover took place for instance, the  percentage of the predecessor’s age between56 to 60 is 10.72 percent; the  percentage of the predecessor’s age between61 to 65 is 1.97 percent. (2) take  all listed companies for instance, the percentage of the predecessor’s age  between 56 to 60 is only 6.67 percent; the percentage of the predecessor’s age  between 61 to 65 is only 0.53 percent. (3) take the average age for instance,  the average age is 46.44 years old when CEO steps down while CEO’s average age  is only 44.49 years old in all listed companies. As a result, we can suggest  that CEO’s age have impact on CEO turnover.

3.5  The education of the predecessor and the successor

Table6 provides statistics for the education when the predecessor  departures, and the distribution of CEO’s education for all listed companies.  The result show that CEO’s education in listed companies which CEO turnover took  place will lower than CEO’s average education in all listed companies. So, we  can suggest that CEO’s education will have important impact on CEO turnover in  listed company.

Table  6. The education of the predecessor

Table7 provides statistics for the education of the successor. From  table6 and table7, we can suggest that the education of the successor will  higher than the education of the predecessor.

Table  7. The education of the successor

3.6  The tenure of the predecessor

Table8 provides statistics for the tenure of the predecessor, and the  distribution of CEO’s tenure for all listed companies. The result show that  CEO’s tenure in listed companies which CEO turnover took place will lower than  CEO’s average tenure in all listed companies. So, we can suggest that CEO’s  tenure will have important impact on CEO turnover in listed company.  

Table  8. The tenure of the predecessor

3.7  The distribution of CEO turnover in some listed companies

Table9 provides statistics for the number of CEO turnover in the same  listed company. During the period 2001 to 2004, the number of company which CEO  turnover took place was 823, the number of CEO turnover was 1269. 505 companies  just took place CEO turnover one time, the percentage was 61.36 percent; 219  companies took place CEO turnover two times, the percentage was 26.60 percent;  99 companies took place CEO turnover more than three times during this four  years.

Table  9. The distribution of CEO turnover in some listed companies

Conclusion  

In this paper, we present a panorama of the Chinese listed companies’ CEO  turnover. We can see that from 2001 to 2004, top three industries about the  number of CEO turnover are Manufacturing, Mixed and Telecommunications  industries; top three industries about relative turnover rate are Media and  culture, Telecommunications and Mixed industries; job re-arrangement,  resignation and expiry of tenure are three mainly publish reasons; the  difference between inside and outside succession is not significant. A deep  analysis showed that age, education and tenure have important impact on CEO  turnover in Chinese listed companies.

Acknowledgement  

We are grateful for the computing resources provided by CSMAR System  (www.gtarsc.com).

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[1] Sponsored by NSFC  (70232010)

[2] Research assistant in Chinese Academy of  Personnel Science, Ministry of Personnel P.R.C; Post-Doctor in School of  Management, Zhejiang University.   Research Direction is Human resource management and entrepreneurship  management. Address: No.5 Yuhuili, Chaoyang District, Beijing,100101, P. R.  China. Email:oyzj591@sohu.com.

[3] Research assistant in Chinese Academy of  Personnel Science, Ministry of Personnel P.R.C; Post-Doctor in School of  Management, Zhejiang University.   Research Direction is Human resource management and entrepreneurship  management.