Corporate performance, CEO power and CEO Turnover: evidence from Malaysian public listed companies

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 firm when compared to well performing firms, furthermore, social network theory and human capital theory suggest that CEO gain their power from their educational background; skill and functional background; special expertise experience; industry specialization; prestige; ownership;age;and lenght of tenure.This power will entrench the CEO in the company, thus making the decision to fire the underperforming CEO more difficult.Our result show that firms with poor performance and older CEO are more likely to change their CEO. In contrast, CEo turnover is less likely to occur when firms exercise CEO/Chairman duality; have CEO who own a certain portion of company shares; and have CEO with longer tenure.