Corporate Performance and CEO Turnover in Korea: A Comparative Analysis of Accounting and Market-based Performance Measures
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초록
This study empirically examines the influence of firm performance on CEO turnover using data of all listed companies on the Korea Stock Exchange, except those in the financial industry, over the period 2000-2012. We control for endogeneity of firm performance by employing the Two-Stage Residuals Inclusion (2SRI) methodology in estimating the random effect (RE) panel probit model and then compare the marginal effects of the two performance measures on the CEO turnover. The empirical results show that both the accounting- and the market-based performance measures are negatively associated with the CEO turnover probability. In non-Chaebol companies, both the performance measures are found to have a significantly negative impact on the CEO turnover, while the accounting-based performance measures have a larger effect than the market-based performance measures do. However, we found that neither of them has any significant impact on the CEO turnover in conglomerate Chaebol companies or their subsidiaries. These findings suggest that board of directors in Chaebol affiliations are relatively ineffective disciplinarians of the management turnover.
Abstract
This study empirically examines the influence of firm performance on CEO turnover using data of all listed companies on the Korea Stock Exchange, except those in the financial industry, over the period 2000-2012. We control for endogeneity of firm performance by employing the Two-Stage Residuals Inclusion (2SRI) methodology in estimating the random effect (RE) panel probit model and then compare the marginal effects of the two performance measures on the CEO turnover. The empirical results show that both the accounting- and the market-based performance measures are negatively associated with the CEO turnover probability. In non-Chaebol companies, both the performance measures are found to have a significantly negative impact on the CEO turnover, while the accounting-based performance measures have a larger effect than the market-based performance measures do. However, we found that neither of them has any significant impact on the CEO turnover in conglomerate Chaebol companies or their subsidiaries. These findings suggest that board of directors in Chaebol affiliations are relatively ineffective disciplinarians of the management turnover.
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