Abstract
This study investigates CEO turnover and corporate performance relationship as a measure of the effectiveness of a corporate governance system. The impact of different financial accounting regimes on the turnover/performance relationship is also analyzed. If systems replace poorly performing managers, they are considered as not ineffective. The results provide evidence that corporate governance systems with poor governance characteristics may not be ineffective, due to the existence of alternative governance mechanisms. The disciplinary CEO turnover is found to be more strongly associated with corporate performance compared to voluntary CEO turnover, whereas in the IFRS subsample the relationship is stronger with contemporaneous performance measures.
Highlights
Corporate governance comprises the set of institutional and market-based mechanisms that induce self interested managers to maximize the value of the firm on behalf of its shareholders (Denis 2001; Denis, McConnell 2003)
The disciplinary CEO turnover is found to be more strongly associated with corporate performance compared to voluntary CEO turnover, whereas in the International Financial Reporting Standards (IFRS) subsample the relationship is stronger with contemporaneous performance measures
In light of the above explanations, the present study mainly aims to investigate the effectiveness of the Turkish corporate governance system by analyzing the relationship between CEO turnover and corporate performance
Summary
Corporate governance comprises the set of institutional and market-based mechanisms that induce self interested managers to maximize the value of the firm on behalf of its shareholders (Denis 2001; Denis, McConnell 2003). Corporate governance broadly refers to the mechanisms by which companies are controlled, directed, made accountable, and governed (Macey 1997; Peck, Ruigrok 2000). B. Durukan et al CEO turnover and corporate performance relationship in pre- and post- IFRS period. In light of the above explanations, the present study mainly aims to investigate the effectiveness of the Turkish corporate governance system by analyzing the relationship between CEO turnover and corporate performance. The second goal of the paper is to analyze the effects of different accounting regimes on this relationship, and on the effectiveness of the corporate governance system. A strengthened relationship due to the change in the accounting regime points to possible steps for further improvement. The present paper extends the literature by comparing the sensitivity of CEO turnover to performance measures derived from different accounting regimes.
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