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Sales Maximization or Profit Maximization? How State Shareholders Discipline their CEOs in China*

Opper, Sonja LU ; Wong, Sonia and Yang, Yong (2012) In Asia-Pacific Journal of Financial Studies 41(3). p.347-375
Abstract
This study examines the determinants of Chief Executive Officer (CEO) turnover in Chinese state-owned firms. Based on a sample of 1 555 turnover cases among listed firms in China during the period 19992003, we obtain three main results. First, CEO turnover is negatively related to the sales performance but not the profitability of the core business. Second, the negative relationship between CEO turnover and sales is stronger for firms with excessive employment and higher organizational slack. Third, there is a significant post-turnover increase in sales but a decline in profitability of the core business. Overall, our evidence suggests that state shareholders put a greater emphasis on sales generation than on profitability when they... (More)
This study examines the determinants of Chief Executive Officer (CEO) turnover in Chinese state-owned firms. Based on a sample of 1 555 turnover cases among listed firms in China during the period 19992003, we obtain three main results. First, CEO turnover is negatively related to the sales performance but not the profitability of the core business. Second, the negative relationship between CEO turnover and sales is stronger for firms with excessive employment and higher organizational slack. Third, there is a significant post-turnover increase in sales but a decline in profitability of the core business. Overall, our evidence suggests that state shareholders put a greater emphasis on sales generation than on profitability when they monitor their CEOs. (Less)
Please use this url to cite or link to this publication:
author
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
State ownership, Managerial monitoring, China's listed firms, G3, L2
in
Asia-Pacific Journal of Financial Studies
volume
41
issue
3
pages
347 - 375
publisher
Wiley-Blackwell
external identifiers
  • wos:000305505900005
  • scopus:84863643061
ISSN
2041-9945
DOI
10.1111/j.2041-6156.2012.01076.x
language
English
LU publication?
yes
id
4ac5c503-7a34-4924-96e1-8298b585f729 (old id 2890544)
date added to LUP
2012-07-25 11:11:53
date last changed
2017-02-26 03:00:19
@article{4ac5c503-7a34-4924-96e1-8298b585f729,
  abstract     = {This study examines the determinants of Chief Executive Officer (CEO) turnover in Chinese state-owned firms. Based on a sample of 1 555 turnover cases among listed firms in China during the period 19992003, we obtain three main results. First, CEO turnover is negatively related to the sales performance but not the profitability of the core business. Second, the negative relationship between CEO turnover and sales is stronger for firms with excessive employment and higher organizational slack. Third, there is a significant post-turnover increase in sales but a decline in profitability of the core business. Overall, our evidence suggests that state shareholders put a greater emphasis on sales generation than on profitability when they monitor their CEOs.},
  author       = {Opper, Sonja and Wong, Sonia and Yang, Yong},
  issn         = {2041-9945},
  keyword      = {State ownership,Managerial monitoring,China's listed firms,G3,L2},
  language     = {eng},
  number       = {3},
  pages        = {347--375},
  publisher    = {Wiley-Blackwell},
  series       = {Asia-Pacific Journal of Financial Studies},
  title        = {Sales Maximization or Profit Maximization? How State Shareholders Discipline their CEOs in China*},
  url          = {http://dx.doi.org/10.1111/j.2041-6156.2012.01076.x},
  volume       = {41},
  year         = {2012},
}