Risk management has been an important topic since the 2008 financial crisis, and it has become an important area of focus in business management. It is important for the board of directors to evaluate the ability and competence of the CEO. This study was aimed to investigate the effect of various risks on forced CEO turnover through the use of a linear probability model. The Chinese A-share market from 2010 to 2019 was selected as the sample, and theoretical analysis and empirical research were combined to explore the impact of various risks on forced CEO turnover, further analyzes the relationship under different ownerships. This paper study revealed that the crash risk is positively associated with forced CEO turnover. This paper also found that the idiosyncratic risk increases the likelihood of forced CEO turnover, and that the relationship is more significant in non- state-owned enterprises (non-SOEs) than state-owned enterprises (SOEs). The systematic risk has no effect on forced CEO turnover. Risks can be an important indicator of the CEO's ability and competence. This paper also evaluated the relationships in Chinese circumstances. China is an emerging market that has a different legal and social environment than other countries. The different goals of SOEs and non-SOEs lead to different risk attitudes. It is necessary to distinguish ownership when evaluating the Chinese situation.
Citation: Xue Chang. Impact of risks on forced CEO turnover[J]. Quantitative Finance and Economics, 2022, 6(2): 177-205. doi: 10.3934/QFE.2022008
Risk management has been an important topic since the 2008 financial crisis, and it has become an important area of focus in business management. It is important for the board of directors to evaluate the ability and competence of the CEO. This study was aimed to investigate the effect of various risks on forced CEO turnover through the use of a linear probability model. The Chinese A-share market from 2010 to 2019 was selected as the sample, and theoretical analysis and empirical research were combined to explore the impact of various risks on forced CEO turnover, further analyzes the relationship under different ownerships. This paper study revealed that the crash risk is positively associated with forced CEO turnover. This paper also found that the idiosyncratic risk increases the likelihood of forced CEO turnover, and that the relationship is more significant in non- state-owned enterprises (non-SOEs) than state-owned enterprises (SOEs). The systematic risk has no effect on forced CEO turnover. Risks can be an important indicator of the CEO's ability and competence. This paper also evaluated the relationships in Chinese circumstances. China is an emerging market that has a different legal and social environment than other countries. The different goals of SOEs and non-SOEs lead to different risk attitudes. It is necessary to distinguish ownership when evaluating the Chinese situation.
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