Acknowledgments: Sonia Wong would like to thank the Business Faculty of Lingnan University for funding this project through the Faculty Research Grant (DB08A9).
Sales Maximization or Profit Maximization? How State Shareholders Discipline their CEOs in China*
Version of Record online: 20 JUN 2012
© 2012 Korean Securities Association
Asia-Pacific Journal of Financial Studies
Special Issue: Special Issue on Corporate Governance in Emerging Markets
Volume 41, Issue 3, pages 347–375, June 2012
How to Cite
Opper, S., Wong, S. and Yang, Y. (2012), Sales Maximization or Profit Maximization? How State Shareholders Discipline their CEOs in China. Asia-Pacific Journal of Financial Studies, 41: 347–375. doi: 10.1111/j.2041-6156.2012.01076.x
- Issue online: 20 JUN 2012
- Version of Record online: 20 JUN 2012
- Received 31 August 2011; Accepted 11 January 2012
- State ownership;
- Managerial monitoring;
- China’s listed firms
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 1999–2003, 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.