CEO Diversity, Political Influences, and CEO Turnover in Unstable Environments: The Romanian Case
Abstract
:1. Introduction
2. A Short Description of the Romanian Environment in Terms of Corporate Governance and Investors’ Protection
3. Literature Review and the Tested Hypotheses
3.1. CEO Turnover and Firm Performance
3.2. CEO Turnover and Corporate Governance
3.3. CEO Turnover, Capital Structure, Dividend Policy, and Sector Homogeneity
3.4. CEO Diversity, Political Influences, and CEO Turnover in Unstable Environments
3.4.1. Particularities of the Romanian Economic Environment
3.4.2. Particularities Related to Post-Communist Economies
4. Methodology and Data
5. Results and Discussion
6. Conclusions
Author Contributions
Funding
Acknowledgments
Conflicts of Interest
Appendix A. The Main Reasons for CEO Turnover for the Romanian Listed Companies 2005–2010
- Retirement (4 cases). We consider retirement before the age of 63 as forced retirement.
- Health problems (2 cases). We consider these cases as unforced reasons.
- Political reasons (4 cases). Hu and Leung (2008) define three types of government intervention: (1) the government can play the role of “invisible hand” and senior executives of state-owned companies are political appointments; (2) the government has no control over the selection and appointment processes; or (3) the appointment is “just window dressing, as politically affiliated directors are puppets of management.” In Romania, the first case is the most common practice for state-owned companies. In our sample are two state-owned companies, Transelectrica and Transgaz, with CEO replacement in 2009. The replacement was made in both cases by the Ministry of Economy in the first months after the new political party won the general election. Additionally, in both cases, there was an exchange between the position of the CEO and the deputy director. It can be noticed that the deputy directors were previously former CEOs in the same companies. The new senior executives appointed are controversial people, influential politicians with strong connections to the political party who won the general election.
- Promotion (3 cases). This refers to a CEO who was promoted and made “a step forward” to take a new position within the company. From our sample, the most relevant example is the CEO from OMV, who resigned following the decision of the OMV group to become senior counsellor of the Chairman of the OMV group.
- Persona non-grata (4 cases). Multiple reasons can be considered to justify the decision to replace the former CEO, from prolonged conflict with the board to conflict of interests or fraud; all of them are seen as forced and illegal decisions by the CEO who was changed. Often, the real reason for CEO replacement is not publicly announced, and thus the mass-media becomes the main source to learn about the internal conflicts within the company.
- Change of ownership (4 cases). If the ownership changes, CEO turnover is inevitable. In this study, we consider these replacements as involuntary.
- Common succession (4 cases). In our sample, these CEOs just finished their four-year mandate and took other functions after their contract expired.
- Pressure from the shareholders (16 cases). This is the most common reason for CEO replacements for the Romanian listed companies for the period 2005–2010. These cases are as follows: CEO dismissal due to low performance, change of jobs to improve firm performance, and a new approach of the company or CEO turnover decided by the majority shareholder(s).
- Separation of the Positions of CEO and Chairman of the Board (5). The BSE Corporate Governance Code recommends avoiding CEO duality, as per many other similar Codes, in an international context. On the contrary, the Romanian listed companies can be considered as following the CEO–Chairman duality pattern.
- CEO resignation (3). Only one case can be considered a CEO resignation, due to prolonged conflicts with the Board concerning the company’s future direction. For the other two cases, the public announcement mentioned only that it was the decision of those CEOs to resign from their current positions.
- Other reasons (2). We include two cases of CEOs who decided to remain only shareholders in their companies and to be actively involved in other businesses.
- No reason (8). From 59 cases of CEO turnover, in 8 cases, the companies did not give any public motivations for these decisions.
References
- Aghion, Philippe, and Jean Tirole. 1997. Formal and real authority in organizations. Journal of Political Economy 105: 1–29. [Google Scholar] [CrossRef]
- Bajtelsmit, Vickie L., and Jack L. VanDerhei. 1997. Risk aversion and pension investment choices. In Positioning Pensions for the Twenty-First Century. Edited by Michael Gordon, Olivia S. Mitchell and Marc Twinney. Philadelphia: University of Pennsylvania Press, pp. 45–66. [Google Scholar]
- Barca, Fabrizio, and Marco Becht. 2001. The Control of Corporate Europe. Oxford: Oxford University Press. [Google Scholar]
- Bhattacharya, Sudipto. 1979. Imperfect information, dividend policy, and “the bird in the hand” fallacy. The Bell Journal of Economics 10: 259–70. [Google Scholar] [CrossRef] [Green Version]
- Beck, Thorsten, Patrick Behr, and A. Andreas Madestam. 2018. Sex and credit: Do gender interactions matter for credit market outcomes? Journal of Banking & Finance 87: 380–96. [Google Scholar]
- Bena, Jan, and Jan Hanousek. 2008. Rent extraction by large shareholders: Evidence using dividend policy in Czech Republic. Czech Journal of Economics and Finance (Finance a Uver) 58: 106–30. [Google Scholar]
- Blackwell, David W., James A. Brickley, and Michael S. Weisbach. 1994. Accounting information and internal performance evaluation: Evidence from Texas banks. Journal of Accounting and Economics 17: 331–58. [Google Scholar] [CrossRef]
- Boenisch, Peter, and Lutz Schneider. 2013. The social capital european legacy of communism—Results from the Berlin wall experiment. Journal of Political Economy 32: 391–411. [Google Scholar] [CrossRef]
- Bollaert, Helen, and Antoine Dilé. 2009. Changes in corporate governance quality in Estonia between 1999 and 2007. Post-Communist Economies 21: 65–84. [Google Scholar] [CrossRef]
- Bolton, Patrick, and Ernst-Ludwig Von Thadden. 1998. Blocks, liquidity, and corporate control. Journal of Finance 53: 1–25. [Google Scholar] [CrossRef]
- Brav, Alon, Wei Jiang, Frank Partnoy, and Randall Thomas. 2008. Hedge fund activism, corporate governance, and firm performance. Journal of Finance 63: 1729–75. [Google Scholar] [CrossRef] [Green Version]
- Brunello, Giorgio, Clara Graziano, and Bruno Parigi. 2003. CEO turnover in insider-dominated boards: The Italian case. Journal of Banking & Finance 27: 1027–51. [Google Scholar]
- Bushman, Robert, Zhonglan Dai, and Xue Wang. 2010. Risk and CEO turnover. Journal of Financial Economics 96: 381–98. [Google Scholar] [CrossRef]
- Campbell, Colin T., Michael Gallmeyer, Shane Johnson, Jessica Rutherford, and Brooke W. Stanley. 2011. CEO optimism and forced turnover. Journal of Financial Economics 101: 695–712. [Google Scholar] [CrossRef]
- Cannella, Albert A., and Wei Shen. 2001. So close and yet so far: Promotion versus exit for CEO heirs apparent. The Academy of Management Journal 44: 252–70. [Google Scholar]
- Cao, Xiaping, Xiaofei Pan, Meijun Qian, and Gary Gang Tian. 2016. Political capital and CEO entrenchment: Evidence from CEO turnover in Chinese non SOEs. Journal of Corporate Finance 42: 1–14. [Google Scholar] [CrossRef] [Green Version]
- Caruso, Alberto, Lucrezia Reichlin, and Giovanni Ricco. 2019. Financial and fiscal interaction in the Euro Area crisis: This time was different. European Economic Review 119: 333–55. [Google Scholar] [CrossRef] [Green Version]
- Chan, Louis K.C., Josef Lakonishok, and Bhaskaran Swaminathan. 2007. Industry classification and return co movement. Financial Analysts Journal 63: 56–70. [Google Scholar] [CrossRef]
- Chen, Jie, Woon Sau Leung, Wei Song, and Marc Goergen. 2019. Why female board representation matters: The role of female directors in reducing male CEO overconfidence. Journal of Empirical Finance 53: 70–90. [Google Scholar] [CrossRef]
- Claessens, Stijn, and Simeon Djankov. 1999. Enterprise performance and management turnover in the Czech Republic. European Economic Review 43: 1115–24. [Google Scholar] [CrossRef]
- Claessens, Stijn, and Simeon Djankov. 2000. Manager incentives and turnover of managers: Evidence from the Czech Republic. New York/London: St. Martin’s/Macmillan Press. [Google Scholar]
- Claessens, Stijn, and Burcin B. Yurtoglu. 2013. Corporate governance in emerging markets: A survey. Emerging Markets Review 15: 1–33. [Google Scholar] [CrossRef]
- Clarke, Richard N. 1989. SICs as delineators of economic markets. Journal of Business 62: 17–31. [Google Scholar] [CrossRef]
- Conyon, Martin J., and Annita Florou. 2002. Top executive dismissal, ownership and corporate performance. Journal Accounting and Business Research 32: 209–25. [Google Scholar] [CrossRef]
- Cremers, K.J. Martijn, and Vinay B. Nair. 2005. Governance mechanisms and equity prices. Journal of Finance 60: 2859–94. [Google Scholar] [CrossRef]
- Cronqvist, Henrik, Anil K. Makhija, and Scott E. Yonker. 2012. Behavioral consistency in corporate finance: CEO personal and corporate leverage. Journal of Financial Economics 103: 20–40. [Google Scholar] [CrossRef]
- Croson, Rachel, and Uri Gneezy. 2009. Gender differences in preferences. Journal of Economic Literature 47: 448–74. [Google Scholar] [CrossRef] [Green Version]
- Dahya, Jay, Jojn J. McConnell, and Nickolaos G. Travlos. 2002. The Cadbury Committee, corporate performance and top management turnover. Journal of Finance 57: 461–83. [Google Scholar] [CrossRef] [Green Version]
- Del Guercio, Diane, Laura Wallis, and Tracie Woidtke. 2008. Do Boards pay attention when institutional investors ‘just vote no’? Journal of Financial Economics 90: 84–103. [Google Scholar] [CrossRef]
- Denis, David J., Diane K. Denis, and Atulya Sarin. 1997. Ownership structure and top executive turnover. Journal of Financial Economics 45: 193–221. [Google Scholar] [CrossRef]
- Denis, David J., and Atulya Sarin. 1999. Ownership and Board structures in publicly traded corporations. Journal of Financial Economics 52: 187–223. [Google Scholar] [CrossRef]
- Dherment-Ferere, Isabelle, and Luc D.R. Renneboog. 2002. Share price reactions to CEO resignations and large shareholder monitoring in listed French companies. In Convergence and Diversity of Corporate Governance Regimes and Capital Markets. Edited by Joseph A. McCahery, Piet Moerland, Theo Raaijmakers and Luc Renneboog. Oxford: Oxford University Press, pp. 297–324. [Google Scholar]
- Dobroţeanu, Camelia L., Laurențiu Dobroţeanu, and Adriana S. Răileanu. 2010. Reporting on corporate governance—A case study on Romanian companies. Transformations in Business & Economics 9: 273–88. [Google Scholar]
- Dragotă, Victor, and Eugen Mitrică. 2004. Emergent capital markets’ efficiency: The case of Romania. European Journal of Operational Research 155: 353–60. [Google Scholar] [CrossRef]
- Dragotă, Victor, Carmen Lipară, and Radu Ciobanu. 2013. Agency problems and synergistic effects in Romania: The determinants of the control premium. Finance a úvěr-Czech Journal of Economics and Finance 63: 197–219. [Google Scholar]
- Dragotă, Victor, and Elena V. Ţilică. 2014. Market efficiency of the post communist East European stock markets. Central European Journal of Operations Research 22: 307–37. [Google Scholar] [CrossRef]
- Eisfeldt, Andrea, and Camelia Kuhnen. 2013. CEO turnover in a competitive assignment framework. Journal of Financial Economics 109: 351–72. [Google Scholar] [CrossRef] [Green Version]
- Eriksson, Tor. 2005. Managerial pay and executive turnover in the Czech and Slovak Republics. Economics of Transition 13: 659–77. [Google Scholar] [CrossRef] [Green Version]
- Faccio, Mara, and Larry H.P. Lang. 2002. The ultimate ownership of western European corporations. Journal of Financial Economics 65: 365–95. [Google Scholar] [CrossRef]
- Fee, Edward C., and Charles J. Hadlock. 2004. Management turnover across the corporate hierarchy. Journal of Accounting and Economics 37: 3–38. [Google Scholar] [CrossRef]
- Fidrmuc, Jana P., and Jan Fidrmuc. 2007. Fire the manager to improve performance? Managerial turnover and incentives after privatization in the Czech Republic. Economics of Transition 15: 505–33. [Google Scholar] [CrossRef]
- Filip, Andrei, and Bernard Raffournier. 2010. The value relevance of earnings in a transition economy: The case of Romania. The International Journal of Accounting 45: 77–103. [Google Scholar] [CrossRef]
- Francis, Bill, Iftekhar Hasan, Jong Chool Park, and Qiang Wu. 2015. Gender differences in financial reporting decision making: Evidence from accounting conservatism. Contemporary Accounting Research 32: 1285–318. [Google Scholar] [CrossRef]
- Gomes, Armando. 2000. Going public without governance: Managerial reputation effects. Journal of Finance 52: 615–46. [Google Scholar] [CrossRef]
- Guo, Lixiong, and Ronald W. Masulis. 2015. Board structure and monitoring: New evidence from CEO turnovers. The Review of Financial Studies 28: 2770–811. [Google Scholar] [CrossRef]
- Hanousek, Jan, Evzen Kocenda, and Jan Svejnar. 2007. Origin and concentration. corporate ownership, control and performance in firms after privatization. The Economics of Transition 15: 1–31. [Google Scholar] [CrossRef]
- Hazarika, Sonali, Lonathan Karpoff, and Rajarishi Nahata. 2012. Internal corporate governance, CEO turnover, and earnings management. Journal of Financial Economics 104: 44–69. [Google Scholar] [CrossRef]
- Helwege, Jean, Vincent J. Intintoli, and Andrew Zhang. 2012. Voting with their feet or activism? Institutional investors’ impact on CEO turnover. Journal of Corporate Finance 18: 22–37. [Google Scholar] [CrossRef]
- Holmström, Bengt, and Jean Tirole. 1983. Market liquidity and performance monitoring. Journal of Political Economy 101: 678–709. [Google Scholar] [CrossRef]
- Hu, Jinshuai, and Jeong-Bon Kim. 2019. The relative usefulness of cash flows versus accrual earnings for CEO turnover decisions across countries: The role of investor protection. Journal of International Accounting, Auditing and Taxation 34: 91–107. [Google Scholar] [CrossRef]
- Hu, Fang, and Sidney Leung. 2012. Top management turnover, firm performance and government control: Evidence from China’s listed state-owned enterprises. The International Journal of Accounting 47: 235–62. [Google Scholar] [CrossRef]
- Huson, Mark R., Robert Parrino, and Laura T. Starks. 2001. Internal monitoring mechanisms and CEO turnover: A long-term perspective. Journal of Finance 56: 2265–97. [Google Scholar] [CrossRef]
- Isakov, Dusan, and Jean-Philippe Weisskopf. 2014. Are founding family’s special blockholders? An investigation of controlling shareholder influence on firm performance. Journal of Banking & Finance 41: 1–16. [Google Scholar]
- Jenter, Dirk, and Fadi Kanaan. 2015. CEO turnover and relative performance evaluation. The Journal of Finance 70: 2155–84. [Google Scholar] [CrossRef] [Green Version]
- Johnson, Johnnie E.V., and Philip L. Powell. 1994. Decision making, risk and gender: Are managers different? British Journal of Management 5: 123–38. [Google Scholar] [CrossRef]
- Kaplan, Seven N., and Bernadette A. Minton. 2012. How has CEO turnover changed? International Review of Finance 12: 57–87. [Google Scholar] [CrossRef] [Green Version]
- Kato, Takao, and Cheryl Long. 2006. CEO turnover, firm performance, and enterprise reform in China: Evidence from micro data. Journal of Comparative Economics 34: 796–817. [Google Scholar] [CrossRef] [Green Version]
- Kang, Jun-Koo, Juan Luo, and Na Hyun Seung. 2018. Are institutional investors with multiple blockholdings effective monitors? Journal of Financial Economics 128: 576–602. [Google Scholar] [CrossRef]
- Kim, Daehyun, and Laura T. Starks. 2016. Gender diversity on corporate Boards: Do women contribute unique skills? American Economic Review 106: 267–71. [Google Scholar] [CrossRef]
- King, Lawrence P., and Ivan Szelenyi. 2005. The new capitalism in Eastern Europe: Towards a comparative political economy of post-communism. In Handbook of economic sociology. Edited by Neil Smelser and Richard Swedberg. Princeton: Princeton University Press. [Google Scholar]
- Leker, Jens, and Soren Salomo. 2000. CEO turnover and corporate performance. Scandinavian Journal of Management 16: 287–303. [Google Scholar] [CrossRef]
- Lin, Ying-Fen, and Victor Wei-Chi Liu. 2004. Firm performance, corporate governance, compensation, and CEO turnover in Taiwan. Asia Pacific Management Journal 9: 603–19. [Google Scholar]
- Liu, Feng, and Linlin Zhang. 2018. Executive turnover in China’s state-owned enterprises: Government-oriented or market-oriented? China Journal of Accounting Research 11: 129–49. [Google Scholar] [CrossRef]
- Maury, Benjamin, and Anete Pajuste. 2002. Controlling shareholders, agency problems and dividend policy in Finland. Finnish Journal of Business Economics 1: 15–45. [Google Scholar]
- Miyajima, Hideaki, Ryo Ogawa, and Takuji Saito. 2018. Changes in corporate governance and top executive turnover: The evidence from Japan. Journal of the Japanese and International Economies 47: 17–31. [Google Scholar] [CrossRef] [Green Version]
- Muravyev, Alexander. 2003. Turnover of senior managers in Russian privatized firms. Comparative Economic Studies 45: 148–72. [Google Scholar] [CrossRef]
- Muravyev, Alexander, Oleksandr Talavera, Olga Bilyk, and Bogdana Grechaniuk. 2010. Is corporate governance effective in Ukraine? A crude test using chief executive officer turnover data. Eastern European Economics 48: 5–24. [Google Scholar] [CrossRef]
- Muravyev, Alexander, Oleksandr Talavera, and Dorothea Schäfer. 2009. Entrepreneurs’ gender and financial constraints: Evidence from international data. Journal of Comparative Economics 37: 270–86. [Google Scholar] [CrossRef] [Green Version]
- Murphy, Kevin J., and Jerold L. Zimmerman. 1993. Financial Performance Surrounding CEO Turnover. Journal of Accounting and Economics 16: 273–315. [Google Scholar] [CrossRef]
- Myers, Stewart C. 2000. Outside equity. Journal of Finance 55: 1005–37. [Google Scholar] [CrossRef]
- Ogilvie, Dt. 1998. Creative action as a dynamic strategy: Using imagination to improve strategic solutions in unstable environments. Journal of Business Research 41: 49–56. [Google Scholar] [CrossRef]
- Parrino, Robert. 1997. CEO turnover and outside succession: A cross-sectional analysis. Journal of Financial Economics 46: 165–97. [Google Scholar] [CrossRef]
- Parrino, Robert, Richard W. Sias, and Laura T. Starks. 2003. Voting with their feet: Institutional ownership changes around forced CEO turnover. Journal of Financial Economics 68: 3–46. [Google Scholar] [CrossRef]
- Powers, Eric. 2005. Interpreting logit regressions with interaction terms: An application to the management turnover literature. Journal of Corporate Finance 11: 504–22. [Google Scholar] [CrossRef]
- Renneboog, Luc. 2000. Ownership, managerial control and the governance of companies Brussels Stock Exchange. Journal of Banking & Finance 24: 1959–95. [Google Scholar]
- Ross, Stephen A. 1977. The determination of financial structure: The incentive—Signalling approach. Bell Journal of Economics and Management Science 8: 23–40. [Google Scholar] [CrossRef]
- Shleifer, Andrei, and Robert W. Vishny. 1997. A survey of corporate governance. Journal of Finance 52: 737–83. [Google Scholar] [CrossRef]
- Skała, Dorota, and Laurent Weill. 2018. Does CEO gender matter for bank risk? Economic Systems 42: 64–74. [Google Scholar] [CrossRef]
- Srinidhi, Bin, Yie Sun, Hao Zhang, and Shiqiang Chen. 2020. How do female directors improve board governance? A mechanism based on norm changes, Journal of Contemporary Accounting & Economics 16: 100–18. [Google Scholar]
- Warner, Jerold B., Ross L. Watts, and Karen H. Wruck. 1988. Stock prices and top management changes. Journal of Financial Economics 20: 461–92. [Google Scholar] [CrossRef]
- Weisbach, Michael S. 1988. Outside directors and CEO turnover. Journal of Financial Economics 20: 431–60. [Google Scholar] [CrossRef]
- Yermack, David. 1996. Higher market valuation of companies with a small Board of directors. Journal of Financial Economics 40: 185–211. [Google Scholar] [CrossRef]
- Zigraiova, Diana. 2015. Management Board Composition of Banking Institutions and Bank Risk-Taking: The Case of the Czech Republic. Working Papers 2015/14. Prague: Czech National Bank. [Google Scholar]
- Zwiebel, Jeffrey. 1996. Dynamic capital structure under managerial entrenchment. American Economic Review 86: 1197–215. [Google Scholar]
1 | The Gross Domestic Product (GDP) per capita (constant 2010 US$) varied between 5735 US$ for Serbia and 23437 US$ for Slovenia in the year 2010, in a comparision which included nine CEE countries (World Bank statistics). Romania had, in 2010, a GDP per capita of 8210 US$. Using the same CEE countries and the same database, Romania had, in 2008, the highest GDP growth rate (11.14%), but a decrease of −4.74% in 2009 (however, better than the case of the Czech Republic (−5.34%), Hungary (−6.46%), Croatia (−7.19%), and Slovenia (−8.63%)). In 2010, Romania had the slowest recovery in terms of GDP growth rate (−3.32%) out of all nine of the analyzed CEE countries. |
2 | Romania had, in 2005, almost the least developed capital market out of all nine of the analyzed CEE countries, with a market capitalization of listed domestic companies (% of GDP) of 16.11%, whereas Poland, Hungary, and Croatia had market capitalization around 30% from GDP. Romania had an even weaker position in 2010 (8.54%), after the fall from 2008, and the gap with countries such as Poland (39.79%) and Croatia (42.76%) increased. At the same time, it can be noticed that Romania was not among the most affected countries by the crisis from the analyzed CEE countries (a decrease of market capitalization as % from GDP around 59% in 2008), while the CEE countries with the most developed capital markets had the highest drop rates (65% and above) (using the World Bank indicators). |
3 | Dragotă et al. (2013) documented an average value of control premium around 115% and a median one of 25% for 173 tender offers carried through the BSE and RASDAQ for the period 2000–2011. |
4 | These results are available upon request. |
5 | The results are available upon request. |
Variable | Description |
---|---|
Panel A: Variables related to the characteristics of the economic environment | |
Political change | The variable ‘political change’ equals 1 for the years with governmental changes and 0 otherwise |
Crisis dummy 1 | 1 for the years 2009 and 2010 and 0 otherwise |
Crisis dummy 2 | 1 for the year 2009 and 0 otherwise |
Industry dummies | |
Panel B: Variables related to peculiarities of post-communist countries | |
Foreign CEO | 1 if the CEO is a foreign citizen and 0 otherwise |
Female CEO | 1 if the CEO is a woman and 0 otherwise |
Firm and industry performance variables | |
Panel C: Accounting-based performance variables | |
Return on assets (ROA) | Operating profit/(total equity + long term debt) |
Operating margin | Operating profit/net sales |
Return on equity (ROE) | Net income/Shareholders’ equity |
Industry-adjusted ROA | ROA – Industry average ROA |
Industry-adjusted operating margin | Operating margin-Industry average operating margin |
Panel D: Market-based performance variables | |
Total stock return | Dividend yield + capital gains yield |
Price to book value | Stock price/book value per share |
Panel E: Other firm specific variables | |
Firm size | Ln (net sales) |
Leverage | Long term debt/Equity |
Dividend dummy | 1 if the company paid dividends during the year and 0 otherwise |
Corporate governance variables | |
Panel F: Ownership structure | |
First shareholder ownership | Proportion of votes/cash flow rights held by the largest shareholder when the CEO was changed |
First shareholder ownership dummy | 1 if the largest shareholder’s ownership exceeds 50% and 0 otherwise |
Government ownership | Proportion of votes held by the state |
CEO ownership dummy | 1, if current CEO is also shareholder and 0 otherwise |
Significant CEO ownership dummy | 1, if CEO’s ownership exceeds 5% and 0 otherwise |
Institutional cumulative ownership | The sum of votes held by all institutional investors, each of them holding more than 5% of the votes |
Institutional cumulative ownership dummy over 33% | 1 if the cumulative ownership of the institutional shareholders exceeds 33% of the votes and 0 otherwise |
Institutional cumulative ownership dummy over 50% | 1 if the cumulative ownership of the institutional shareholders exceeds 50% of the votes and 0 otherwise |
Change in institutional investors ownership | |
Panel G: Board characteristics | |
Board size | Number of Directors of the Board |
Board independence | Number of independent directors divided by the number of the non-independent ones |
Board independence dummy | 1 if the number of independent directors is half or more of the board size and 0 otherwise |
CEO-Chairman duality | 1 for a CEO who simultaneously holds the positions of Chairman of the Board and CEO and 0 otherwise |
Indicator | Average Value | Median Value | Minimum Value | Maximum Value | Standard Deviation |
---|---|---|---|---|---|
Variables related to the characteristics of the economic environment | |||||
Crisis dummy 1 | 0.500 | 0.500 | 0 | 1 | 0.500 |
Crisis dummy 2 | 0.167 | 0 | 0 | 1 | 0.373 |
Political change | 0.333 | 0 | 0 | 1 | 0.471 |
Variables related to peculiarities of post-communist countries | |||||
Foreign CEO | 0.113 | 0 | 0 | 1 | 0.317 |
Female CEO | 0.116 | 0 | 0 | 1 | 0.320 |
Firm and industry performance variables (values in coefficients) | |||||
Return on assets | 0.038 | 0.047 | −1.152 | 0.458 | 0.165 |
Operating margin | 0.032 | 0.009 | −0.334 | 0.581 | 0.135 |
Return on equity | 0.056 | 0.058 | −0.785 | 0.446 | 0.148 |
Industry-adjusted ROA | 0.001 | 0.003 | −0.624 | 0.576 | 0.122 |
Industry adjusted operating margin | 0.099 | 0.072 | −0.456 | 0.715 | 0.165 |
3-years average ROA | 0.069 | 0.066 | −0.542 | 0.387 | 0.117 |
3-years average ROE | 0.065 | 0.069 | −0.408 | 0.402 | 0.119 |
3-years average operating margin | 0.105 | 0.072 | −0.228 | 0.688 | 0.153 |
Total stock return | 0.343 | 0.180 | −0.935 | 4.976 | 0.779 |
Price to Book value | 1.543 | 0.950 | 0.080 | 8.560 | 1.688 |
Other firm specific variables | |||||
(ln) Firm size | 18.558 | 18.322 | 14.996 | 23.670 | 1.604 |
Leverage (coefficients) | 0.172 | 0.045 | 0 | 1.992 | 0.314 |
Dividend dummy | 0.324 | 0 | 0 | 1 | 0.468 |
Corporate governance variables | |||||
CEO Turnover | 0.125 | 0 | 0 | 1 | 0.331 |
CEO forced turnover | 0.068 | 0 | 0 | 1 | 0.252 |
First shareholder ownership (%) | 47.418 | 52.000 | 0.0001 | 98.000 | 25.864 |
First shareholder ownership dummy | 0.542 | 1 | 0 | 1 | 0.499 |
Government ownership (%) | 3.816 | 0 | 0 | 79 | 14.475 |
CEO ownership dummy | 0.399 | 0 | 0 | 1 | 0.491 |
Significant CEO ownership dummy | 0.241 | 0 | 0 | 1 | 0.429 |
Institutional cumulative ownership (%) | 26.070 | 11 | 0 | 93 | 30.771 |
Institutional cumulative ownership over 33% | 0.340 | 0 | 0 | 1 | 0.475 |
Institutional cumulative ownership over 50% | 0.298 | 0 | 0 | 1 | 0.458 |
Change in institutional investors’ ownership (%) | 0.980 | 0 | −58.000 | 93.000 | 10.182 |
Board size | 5.556 | 5 | 2 | 11 | 2.233 |
Board independence | 2.369 | 2 | 0 | 6 | 1.713 |
Board independence dummy | 0.817 | 1 | 0 | 1 | 0.388 |
CEO-Chairman duality | 0.373 | 0 | 0 | 1 | 0.485 |
Variables | Expected Sign | Equation | Equation | Equation | Equation | Equation | Equation | Equation | Equation |
---|---|---|---|---|---|---|---|---|---|
(1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) | ||
Industry-adjusted return on assets | - | −9.1228 | |||||||
[0.00] | |||||||||
−0.493 | |||||||||
Return on assets (ROA) | - | −4.54623 | |||||||
[0.00] | |||||||||
−0.469 | |||||||||
Return on equity (ROE) | - | −5.72032 | |||||||
[0.00] | |||||||||
−0.323 | |||||||||
Industry-adjusted operating margin | - | −5.94133 | |||||||
[0.00] | |||||||||
−0.351 | |||||||||
Operating margin | - | −9.01518 | |||||||
[0.00] | |||||||||
−0.542 | |||||||||
3 years average return on assets | - | −5.2662 | |||||||
[0.01] | |||||||||
−0.312 | |||||||||
3 years average return on equity | - | −5.18364 | |||||||
[0.00] | |||||||||
−0.302 | |||||||||
3 years average operating margin | - | −7.0803 | |||||||
[0.02] | |||||||||
−0.432 | |||||||||
Foreign CEO | +/− | 2.034089 | 1.259163 | 1.866373 | 2.31829 | 2.197453 | 2.40688 | 2.12277 | 1.98776 |
[0.02] | [0.00] | [0.02] | [0.00] | [0.00] | [0.00] | [0.00] | [0.01] | ||
0.152 | 0.161 | 0.15 | 0.202 | 0.183 | 0.219 | 0.187 | 0.177 | ||
Crisis dummy 2 | + | 1.292348 | 0.645056 | 0.951188 | 1.072577 | 1.069988 | 0.896042 | 0.815577 | 0.82362 |
[0.02] | [0.06] | [0.09] | [0.05] | [0.05] | [0.07] | [0.097] | [0.02] | ||
0.083 | 0.073 | 0.061 | 0.075 | 0.075 | 0.061 | 0.055 | 0.058 | ||
Female CEO | + | 1.279092 | 0.537237 | 1.122408 | 0.869574 | 1.096683 | 1.13084 | ||
[0.08] | [0.15] | [0.098] | [0.23] | [0.09] | [0.08] | ||||
0.081 | 0.075 | 0.078 | 0.084 | ||||||
Government ownership × Political change | + | 0.040583 | 0.025951 | 0.040694 | 0.035569 | 0.040903 | 0.035542 | 0.034834 | 0.03583 |
[0.01] | [0.00] | [0.00] | [0.07] | [0.01] | [0.07] | [0.07] | [0.045] | ||
CEO−Chairman duality | − | −3.3509 | −1.60233 | −2.57295 | −2.57654 | −2.33399 | −2.65378 | −2.48547 | −1.9570 |
[0.08] | [0.00] | [0.02] | [0.00] | [0.01] | [0.00] | [0.00] | [0.02] | ||
−0.104 | −0.136 | −0.100 | −0.109 | −0.100 | −0.110 | −0.106 | −0.091 | ||
Change in institutional investors ownership | Insignificant/− | −0.03460 | |||||||
[0.08] | |||||||||
−0.002 | |||||||||
First shareholder dummy | − | −1.45821 | −1.05737 | −1.84211 | −2.06363 | −1.50065 | −1.74685 | −1.77616 | −1.4832 |
[0.05] | [0.00] | [0.02] | [0.00] | [0.03] | [0.00] | [0.00] | [0.03] | ||
−0.084 | −0.113 | −0.115 | −0.135 | −0.096 | −0.115 | −0.116 | −0.099 | ||
Ln (net sales) | − | −0.35245 | −0.26063 | −0.42307 | −0.53417 | −0.35748 | −0.4673 | −0.43460 | −0.3281 |
[0.09] | [0.02] | [0.08] | [0.01] | [0.099] | [0.01] | [0.03] | [0.08] | ||
−0.019 | −0.027 | −0.024 | −0.032 | −0.022 | −0.028 | −0.025 | −0.020 | ||
Leverage | − | −4.08264 | −2.21574 | −4.10193 | −4.60895 | −4.34411 | −4.22106 | −3.76608 | −3.8271 |
[0.06] | [0.01] | [0.09] | [0.02] | [0.09] | [0.01] | [0.02] | [0.05] | ||
−0.220 | −0.229 | −0.232 | −0.272 | −0.262 | −0.250 | −0.220 | −0.234 | ||
Utilities dummy | 6.210834 | 4.110076 | 6.852578 | 8.024094 | 6.278387 | 6.748419 | 6.545332 | 6.68263 | |
[0.00] | [0.00] | [0.00] | [0.00] | [0.00] | [0.00] | [0.00] | [0.00] | ||
0.646 | 0.636 | 0.764 | 0.824 | 0.724 | 0.757 | 0.759 | 0.8 | ||
Energy dummy | 2.572995 | 2.218322 | 2.87868 | 4.258439 | 2.697677 | 3.908447 | 3.332632 | 2.8089 | |
[0.08] | [0.00] | [0.08] | [0.00] | [0.06] | [0.00] | [0.00] | [0.00] | ||
0.21 | 0.321 | 0.278 | 0.465 | 0.256 | 0.426 | 0.358 | 0.299 | ||
Pharmaceutics dummy | 1.524418 | 2.459127 | 2.255324 | 2.281926 | |||||
[0.00] | [0.00] | [0.01] | [0.00] | ||||||
0.206 | 0.23 | 0.208 | 0.213 | ||||||
Constant C | 3.636597 | 3.432823 | 5.683193 | 7.762265 | 4.091619 | 6.629814 | 6.062318 | 4.13335 | |
[0.98] | [0.08] | [0.19] | [0.03] | [0.30] | [0.05] | [0.095] | [0.22] | ||
Prob (LR Statistic) | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |
Pseudo R2 | 0.37 | 0.4 | 0.33 | 0.3 | 0.3 | 0.29 | 0.3 | 0.27 |
© 2020 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (http://creativecommons.org/licenses/by/4.0/).
Share and Cite
Dragotă, I.-M.; Curmei-Semenescu, A.; Moscu, R. CEO Diversity, Political Influences, and CEO Turnover in Unstable Environments: The Romanian Case. J. Risk Financial Manag. 2020, 13, 59. https://doi.org/10.3390/jrfm13030059
Dragotă I-M, Curmei-Semenescu A, Moscu R. CEO Diversity, Political Influences, and CEO Turnover in Unstable Environments: The Romanian Case. Journal of Risk and Financial Management. 2020; 13(3):59. https://doi.org/10.3390/jrfm13030059
Chicago/Turabian StyleDragotă, Ingrid-Mihaela, Andreea Curmei-Semenescu, and Raluca Moscu. 2020. "CEO Diversity, Political Influences, and CEO Turnover in Unstable Environments: The Romanian Case" Journal of Risk and Financial Management 13, no. 3: 59. https://doi.org/10.3390/jrfm13030059