Does frequent leadership changes influence firm performance? Insights from China

Authors

  • Ahsan Akbar International Business School, Guangzhou College, South China University of Technology, Guangzhou, 510800, China
  • Xinfeng Jiang College of Economics and Management, Huazhong Agricultural University, Wuhan 430070, China
  • Zeeshan Fareed School of Finance, Zhongnan University of Economics and Law, Wuhan 430070, China
  • Minhas Akbar COMSATS University Islamabad, Sahiwal Campus

DOI:

https://doi.org/10.17811/ebl.10.3.2021.291-298

Abstract

This letter is a first attempt to investigate the relationship between frequent leadership changes during the year and firm performance. We analyze how CEO frequency during one-year period impact performance indicators of Chinese listed firms. The results of panel fixed-effect regression reveal that CEO turnover leads to a decline in corporate performance measured by ROA and ROE. Moreover, with an increase in annual turnover frequency, the degree of performance decline gets more pronounced. These results remain robust after controlling for endogeneity using the alternate econometric specification of 2SLS. The study findings assert that frequent CEO changes are not conducive to firm performance. Hence, stability in the CEO tenure is essential to sustain and optimize financial performance of an enterprise.

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Published

2021-08-02

How to Cite

Akbar, A., Jiang, X., Fareed, Z., & Akbar, M. (2021). Does frequent leadership changes influence firm performance? Insights from China. Economics and Business Letters, 10(3), 291-298. https://doi.org/10.17811/ebl.10.3.2021.291-298