The Association between Executive Turnover, Family Business and Firm Performance: Evidence in Taiwan

Abstract

This study examines the relationship between the turnover of high-level executives and firm performance in Taiwan. Prior studies of executive turnover focus solely on changes to a firms' Chief Executive Officer (CEO), Board of Director (BOD) Chair, or Chief Financial Officer (CFO). This study is the first to include the role of Chief Accounting Officers (CAO) in our analysis and investigation of executive turnover and its effect on firm performance. Chief Accounting Officers of Taiwanese firms, are required to certify financial statements and provide assurance of financial reporting, a special requirement unique to Taiwan. Additionally, our study weighs factors of family-owned business and the tenure of executives against their effect on firm performance. Our results suggest a negative association between executive turnover and accounting performance; market performance of price to book ratio (PB ratio), however, is not significantly related to various types of turnovers except the turnover of the CEO. Moreover, our findings demonstrate that longer management tenure does not lead to improvement in firm performance and may result in negative market valuations.