Effectiveness of internal governance of listed companies

It is a“window”to observe the effectiveness of corporate governance system by examining the relation of top manager’s turnover and corporate performance. According to CSMAR database statistics, from 2001 to 2009, the replacement rate of chairman or general manager is 31%, much higher than the United States, India, Brazil and other countries or regions. In the context of China’s stock market is not perfect, and M & A market and Manager market are not active, the issue is what triggers the managers’turnover, and what is the relation between the turnover and performance, or is it the consequence monitor duties of corporate governance?To do this, based on the perspective of top manager turnover, after the analysis of the internal governance’s characteristics and the status of top manager turnover, two steps are considered to study the effectiveness of China’s corporate governance. The first is to study the impact of operating performance on top manager turnover, in order to examine whether operating performance is an important reason for top manager turnover; the second is to study the impact of top manager turnover on operating performance, aiming at finding the changes in operating performance after top manager turnover. Finally, summarize the findings and put forward some policy recommendations. To examine the effectiveness of corporate governance,two models are created. One is the Logit regression model about the impact of operating performance on top manager turnover, the other is the linear regression model about the impact of top manager turnover on operating performance.The innovation of this paper is mainly manifested in two aspects: First, from the changes in operating performance after the turnover to further examine the effectiveness of internal governance of listed companies. Second, the use of operating performance three years before and after top manager turnover, fully considered the time delay of turnover. The purpose of this paper is to make a comprehensive and objective assessment for the effectiveness of China’s internal corporate governance. And to find the existing problems in the internal corporate governance, in order to provide theoretical reference and policy recommendations for improving the corporate governance.This paper can be divided into two parts. The first part is about internal governance’s characteristics and the facts and figures of top manager turnover. The second part is the empirical studies about the relevance between operating performance and top manager turnover. The conclusion is as follows: Continued decline in operating performance prompted the turnover. The closer to the year of top manager turnover, the stronger role in promoting; After the top manager turnover, the operating performance has not improved, but show a downward trend,but this trend is not obvious.In general, China’s internal corporate governance goes through a rapid development, and makes great progress in formation. But it is relative lagged in practice. So this paper suggests some measures should be taken to improve external and internal governance, such as strengthening boards’functions, building external markets, improving the performance evaluation system.