گردش مالی مدیر عامل شرکت و ثروت سهامداران: شواهدی از قدرت مدیر عامل شرکت در تایوان

This paper investigates the relationship between CEO turnovers and shareholder wealth and/or the volatility of firm performance, and examines whether CEO power matters in this relationship. Successors tend to possess less power than predecessors. The announcement effects of CEO turnovers present higher abnormal returns for turnovers in which predecessors and successors share a similar power level and a lower volatility for turnovers in which successors have less power. Volatility is lower and liquidity is higher when CEO turnovers involve successors with less power.

Apple shares fell as much as 7% in extended trading after the announcement of the resignation of Jobs who has been a strong figure in the company historically. Several studies attempt to investigate the impact of CEO power and CEO turnovers on firm performance and/or risk, respectively. This paper integrates the above two issues by assessing the relationship between CEO turnovers and shareholder wealth and/or the volatility and by examining whether CEO power plays a role in this relationship. Daily and Johnson (1997) test the interrelationship of CEO power and firm financial performance. Adams, Almedia, and Ferreira (2005) investigate whether firms experience more variability in performance when CEOs have more power. Harjoto and Jo (2009) examine the effect of CEO power on firm performance from life-cycle theory. This paper considers the influence of CEO power shifts. Huson, Parrino, and Starks (2001) find a rather consistent relationship between the likelihood of forced CEO turnover and firm performance. DeFond and Hung (2004) find that strong law enforcement institutions improve the association between CEO turnover and poor performance. Both studies focus on CEO turnover-performance sensitivity rather than focusing on the CEO power shifts due to CEO turnovers. Allgood and Farrell (2000) study CEO tenure, firm performance, and forced turnover, but rather than focusing on dynamic CEO power and its impact on shareholder wealth and/or volatility, they focus on the effect of CEO power on performance-forced turnover relation. This paper has three purposes. First, it analyzes the dynamic of CEO power from turnovers. The underlying idea is that firms might prefer a certain CEO power-shifted turnover type. According to the circulation model, CEOs with less power are expected to be cautious when consolidating their current positions. The directors may be apt to nominate CEOs with less power. The result shows that approximately 87% of successors in CEO turnover events have less power. Second, the paper studies the market reactions to turnovers with regard to power shifts. Applying the view of the circulation theory, I expect that investors have more confidence in a firm whose CEO power level is relatively stable. I find positive effects of the overall turnover. The positive effect is driven by symmetric CEO turnovers and supports the common sense theory which indicates a positive reaction after CEO successions. I do not find significant announcement effects of turnovers involving CEO power shifts — consistent with the ritual scapegoating theory that suggests an insignificant relationship between CEO turnover and firm performance. The paper finally investigates the effect of a CEO power shift in the relationship of CEO turnover and investment risk. Adams et al. (2005) find that stock returns are more variable for firms run by powerful CEOs. Hence, I anticipate that successors with less power may contribute to lower risk and higher liquidity. The variability of stock prices decreases after the announcement of the overall CEO turnovers. Moreover, volatility is lower and liquidity is higher when CEO turnovers involve successors with less power. The results are robust to include alternative measures, the possible influence of informativeness, and the prolonged event windows. This study contributes to the existing literature on CEO power and turnovers in two important ways. Little research has been done on a direct empirical assessment of the announcement effect of CEO turnover regarding the power shift. This study examines the informational effect of CEO turnover as reflected in different types of CEO power shift. I add to a small but growing literature that examines CEO turnover outside of the United States. Developed markets are characterized by strong legal protection of minority shareholders' interests and diffuse ownership structures. Emerging markets such as Taiwan are characterized by weak protection of shareholder and creditor rights. The prevalence of family businesses in Taiwan (about 70% of listed companies are this type) increases the power of the strategic decision of a business owner. CEO succession is an important issue in such an environment since the CEO is a key element in the managerial decision and plays a major role in the functioning of organizational strategies. According to agency theory, CEOs are self-interested, risk averse, and possess goals that diverge from those of shareholders. Thus, CEOs will engage in self-serving actions at shareholders' expense when given an opportunity (Jensen & Meckling, 1976). This paper broadens the knowledge by showing that a CEO power shift plays a role in the relationship between CEO turnovers and shareholder wealth and/or volatility. This result provides evidence for the existing CEO turnover literature and thus has important CEO succession implications. The remainder of this paper proceeds as follows. Section 2 discusses the related theory and proposes hypotheses. Section 3 describes the sample and methodology. Section 4 represents the announcement effect of CEO turnovers regarding CEO power shift and the influence of different CEO turnover types on volatility and liquidity. Section 5 provides a conclusion.

I investigate the relationship between CEO turnovers and shareholder wealth and/or volatility of firm performance regarding CEO power shift. Successors tend to possess a low level of power. The positive announcement effect of CEO turnovers, consistent with common sense theory, is mainly attributable to symmetric CEO turnovers. Investors prefer firms whose CEO power level is relatively stable. The volatility of stock returns decreases after a turnover announcement, particularly for firms whose successors have less power. Consistent with Adams et al. (2005), firms experience lower volatility if their successors have less power. The volatility of stock returns decreases by 13.46% to 17.06% from the mean due to non-powerful CEO turnovers/successors. I find a negative relationship between non-powerful CEO turnovers and liquidity. Overall, four CEO turnover types show different influences on shareholder wealth and volatility of firm performance. Firms experience not only high abnormal returns and liquidity, but also low volatility after non-powerful CEO turnovers. Both short- and long-term announcement effects of powerful CEO turnovers are significantly positive. Although firms' one-year abnormal returns are negative, the volatility of stock returns is lower after non-powerful CEO successors. Powerful CEO successors show an impact on neither shareholder wealth nor volatility of performance. Boards of directors and other interested parties should carefully monitor the new CEOs with regard to their power level since the CEO plays a major role in the organizational strategies in Asian business. It provides insight into the corporate governance from CEO power. CEO power shift and CEO turnover issues should be discussed together.