Corporate Performance, CEO Power and CEO Turnover: Evidence from Malaysian Public Listed Companies (Prestasi Syarikat, Kuasa CEO dan Pertukaran CEO: Bukti dari Syarikat Tersenarai Awam Malaysia

Rokiah Ishak, Ku Nor Izah Ku Ismail, Shamsul Abdullah

Abstract


This paper seeks to determine the impact of firm performance and CEO power on CEO turnover. Research in CEO turnover literature found that corporate performance is frequently used as an indicator to evaluate the effectiveness of CEO effort and findings from most of these studies indicate that the turnover rate of CEO is higher for poor performing firms when compared to well performing firms. Furthermore, social network theory and human capital theory suggest that CEOs gain their power from their educational background; skill and functional background; special expertise; experience; industry specialization; prestige; ownership; age; and length of tenure. This power will entrench the CEO in the company, thus making the decision to fire the underperforming CEO more difficult. Our results show that firms with poor performance and older CEOs are more likely to change their CEOs. In contrast, CEO turnover is less likely to occur when firms exercise CEO/Chairman duality; have CEOs who own a certain portion of company shares; and have CEOs with longer tenure.


ABSTRAK
Kajian ini bertujuan untuk menentukan kesan prestasi syarikat dan kuasa CEO ke atas pertukaran CEO. Sorotan kajian berkaitan pertukaran CEO mendapati prestasi syarikat sering digunakan sebagai penentu dalam menilai keberkesanan usaha CEO dan penemuan daripada kajian tersebut mendapati kadar pertukaran CEO adalah tinggi bagi syarikat berprestasi rendah berbanding syarikat berprestasi tinggi. Selain daripada itu, teori rangkaian sosial dan teori modal insan mencadangkan bahawa CEO memperoleh kuasa melalui latar belakang pendidikan, latar belakang fungsi dan kemahiran, kepakaran, pengalaman, keutamaan industri, prestij, pemilikan, umur dan tempoh memegang jawatan yang lama. Kuasa ini akan mengukuhkan kedudukan CEO dalam sesebuah syarikat yang menjadikan proses membuat keputusan bagi melucutkan jawatan CEO berprestasi rendah lebih sukar. Dapatan kajian menunjukkan syarikat berprestasi rendah dan mempunyai CEO yang berumur lebih cenderung untuk menukar CEO. Sebaliknya, pertukaran CEO adalah rendah bagi syarikat yang mempraktikkan dwi peranan CEO/Pengerusi, mempunyai CEO yang mempunyai pemilikan saham syarikat dan CEO yang memegang jawatan untuk satu tempoh masa yang lama.


Keywords: Chief executive officer (CEO); CEO turnover; Corporate performance; CEO duality


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