Big is beautiful: How state shareholders discipline their CEOs in China

Sales maximization or profit maximization? How state shareholders discipline their CEOs in China This study examines the determinants of CEO turnover in Chinese state-owned firms. Based on a sample of 1555 turnover cases among listed firms in China during the period 1999 to 2003, we obtain three main results. First, CEO turnover is negatively related to the sales performance but not the profitability of the core business. Second, the negative relationship between CEO turnover and sales is stronger for firms with excessive employment and higher organizational slack. Third, there is a significant post-turnover increase in sales but a decline in profitability of the core business. Overall, our evidence is consistent with the hypothesis that state shareholders put a greater emphasis on sale