Does corporate performance matter for the changes
Description: Does corporate performance matter for the changes in the Boards and the dismissal of CEO? Strategic oversight of boards in emerging capital market of Russia Irina Ivashkovskaya Anastasia Stepanova Anastasia Suchkova EIASM workshop on
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slide1. Does corporate performance matter for the changes in the Boards and the dismissal of CEO? Strategic oversight of boards in emerging capital market of Russia Irina Ivashkovskaya
Anastasia Stepanova
Anastasia Suchkova EIASM workshop on Corporate Governance, Brussels, 29 October 2015 Corporate Finance research Center
Center for Fundamental Studies
National Research University Higher School of Economics, Moscow<br>
slide2. Agenda Higher School of Economics , Moscow, 2015<br>
slide3. Strategic Oversight of Boards BOARD
ROLES CONFORMANCE
Short term monitoring PERFORMANCE
Long term focused
Strategic advice Monitoring ability to implement strategic decisions Monitoring ability to lead strategic changes Financial architecture
Ownership concentration
State ownership
Outside/inside boards CEO Human capital<br>
slide4. Aim and objectives 4 Higher School of Economics , Moscow, 2015 Research question:
Does firm performance influence CEO turnover and the changes in the Board of directors in emerging markets? To develop the models of CEO turnover- performance and boards changes- performance
To find the drivers which mitigate CEO turnover- performance and boards changes- performance in Russian corporations<br>
slide5. 5 Higher School of Economics , Moscow, 2015 Show HOW performance measures influence CEO turnover and BD changes in EMERGING capital market
Conformance –performance trade-off in CG in EM Demonstrate the influence of corporate financial architecture on performance-turnover-changes Show the role of CEO characteristics in performance-turnover relations Contribution<br>
slide6. Higher School of Economics , Moscow, 2015 photo photo photo CEO Turnover-Performance: Measures<br>
slide7. Higher School of Economics , Moscow, 2015 photo photo photo Financial architecture and performance-CEO turnover relationship<br>
slide8. photo photo Human capital perspective Collection of resources (all the knowledge, talents, skills, abilities, experience, intelligence, training, judgment) possessed individually Total capacity of the people that represents a form of wealth. 2 types of human capital: general and firm-specific (Becker, 1964) Higher School of Economics , Moscow, 2015<br>
slide9. Higher School of Economics , Moscow, 2015 photo photo photo Board changes<br>
slide10. photo photo Hypotheses Higher School of Economics , Moscow, 2015<br>
slide11. Higher School of Economics , Moscow, 2015 11 Variables Higher School of Economics , Moscow, 2015<br>
slide12. Higher School of Economics , Moscow, 2015 12 Higher School of Economics , Moscow, 2015 Models<br>
slide13. Higher School of Economics , Moscow, 2015 13 Data Higher School of Economics , Moscow, 2015 65 Russian public
companies 10 years period:
2005-2014<br>
slide14. 14 Results. CEO turnover * - significance at 1% level; ** - significance at 5% level; *** - significance at 10% level Higher School of Economics , Moscow, 2015<br>
slide15. Higher School of Economics , Moscow, 2015 photo Confirmed For total sample: contradicts to previous researches (Weisbach (1988), Engle et (2003), HomRoy S. (2015)). Confirms Barro and Barro (1990).
For subsample where oligarch is a shareholder the hypothesis is confirmed. Agree with previous researches (Murphy and Zimmrrmun (1993), Weisbach (1988) etc) Contradicts to previous researches (Conyon and He (2014), Chi and Wang (2009)) Confirms previous researches (Kato and Long (2006)) Results. CEO turnover<br>
slide16. Higher School of Economics , Moscow, 2015 photo Results. CEO turnover -performance OVERALL SAMPLE:
Negative relationship: Market value based performance-CEO turnover (at 5%)
Book value - based : not significant SUBSAMPLES:
LARGE SHAREHOLDERS (OLIGARCH):
Book value- based performance :negative significant (at 5%), market value – based: NOT significant
The power of influence: Marginal effects (the of CEO turnover changes, if the variable increases by 1pp)
ROA – provides 0.18pp STATE CONTROLED:
Market value - based performance negative and significant based
Marginal effects lower: 0,07pp<br>
slide17. * - significance at 1% level; ** - significance at 5% level; *** - significance at 10% level Higher School of Economics , Moscow, 2015 Results. СEO turnover<br>
slide18. Higher School of Economics , Moscow, 2015 photo Results. CEO turnover and HC OVERALL SAMPLE:
HC CEO is significant driver:
CEO age (proxy for general skills) negative sign: the younger, the higher the probability of CEO dismissal
For “oligarch” subsample: the negative coefficient is even higher
The CEO education ( technical and economic )- proxy for specific skills at 5%: the probability of dismissal is higher in state-controlled
(65% were with techinical education related to the industry)<br>
slide19. Higher School of Economics , Moscow, 2015 Results. CEO characteristics Confirmed This result matches with the results Conyon (1998) and Jensen and Murphy (1990). We confirmed this hypothesis for the subsample of state-affiliated companies This can be explained by the specific feature of USSR educational system, when the alumni of the universities were distributed by the state to the exact companies in different regions depending on their specialization and on the labor demand.<br>
slide20. Higher School of Economics , Moscow, 2015 Higher School of Economics , Moscow, 2015 Results. Chairman changes is rejected. The results contradict to Liu, Wang, Zhao and Ahlstrom (2013) ONLY frequency of meetings matters<br>
slide21. Higher School of Economics , Moscow, 2015 Conclusion CEO turnover in Russia Using Russian market we supported that CEO can be dismissed if company has poor performance. That support previous researches on emerging and developed markets.<br>
slide22. Further research Higher School of Economics , Moscow, 2015 RESEARCH PERSPECTIVES:
Performance - board changes (outside? Inside?) and in what cases this relationship works.
To investigate how board composition influence on performance-turnover relations
Specify CEO and Board characteristics HC and their influence
Compare to other EM Higher School of Economics , Moscow, 2015<br>
slide23. 20, Myasnitskaya str., Moscow, Russia, 101000
Tel.: +7 (495) 628-8829, Fax: +7 (495) 628-7931
www.hse.ru<br>
Anastasia Stepanova
Anastasia Suchkova EIASM workshop on Corporate Governance, Brussels, 29 October 2015 Corporate Finance research Center
Center for Fundamental Studies
National Research University Higher School of Economics, Moscow<br>
slide2. Agenda Higher School of Economics , Moscow, 2015<br>
slide3. Strategic Oversight of Boards BOARD
ROLES CONFORMANCE
Short term monitoring PERFORMANCE
Long term focused
Strategic advice Monitoring ability to implement strategic decisions Monitoring ability to lead strategic changes Financial architecture
Ownership concentration
State ownership
Outside/inside boards CEO Human capital<br>
slide4. Aim and objectives 4 Higher School of Economics , Moscow, 2015 Research question:
Does firm performance influence CEO turnover and the changes in the Board of directors in emerging markets? To develop the models of CEO turnover- performance and boards changes- performance
To find the drivers which mitigate CEO turnover- performance and boards changes- performance in Russian corporations<br>
slide5. 5 Higher School of Economics , Moscow, 2015 Show HOW performance measures influence CEO turnover and BD changes in EMERGING capital market
Conformance –performance trade-off in CG in EM Demonstrate the influence of corporate financial architecture on performance-turnover-changes Show the role of CEO characteristics in performance-turnover relations Contribution<br>
slide6. Higher School of Economics , Moscow, 2015 photo photo photo CEO Turnover-Performance: Measures<br>
slide7. Higher School of Economics , Moscow, 2015 photo photo photo Financial architecture and performance-CEO turnover relationship<br>
slide8. photo photo Human capital perspective Collection of resources (all the knowledge, talents, skills, abilities, experience, intelligence, training, judgment) possessed individually Total capacity of the people that represents a form of wealth. 2 types of human capital: general and firm-specific (Becker, 1964) Higher School of Economics , Moscow, 2015<br>
slide9. Higher School of Economics , Moscow, 2015 photo photo photo Board changes<br>
slide10. photo photo Hypotheses Higher School of Economics , Moscow, 2015<br>
slide11. Higher School of Economics , Moscow, 2015 11 Variables Higher School of Economics , Moscow, 2015<br>
slide12. Higher School of Economics , Moscow, 2015 12 Higher School of Economics , Moscow, 2015 Models<br>
slide13. Higher School of Economics , Moscow, 2015 13 Data Higher School of Economics , Moscow, 2015 65 Russian public
companies 10 years period:
2005-2014<br>
slide14. 14 Results. CEO turnover * - significance at 1% level; ** - significance at 5% level; *** - significance at 10% level Higher School of Economics , Moscow, 2015<br>
slide15. Higher School of Economics , Moscow, 2015 photo Confirmed For total sample: contradicts to previous researches (Weisbach (1988), Engle et (2003), HomRoy S. (2015)). Confirms Barro and Barro (1990).
For subsample where oligarch is a shareholder the hypothesis is confirmed. Agree with previous researches (Murphy and Zimmrrmun (1993), Weisbach (1988) etc) Contradicts to previous researches (Conyon and He (2014), Chi and Wang (2009)) Confirms previous researches (Kato and Long (2006)) Results. CEO turnover<br>
slide16. Higher School of Economics , Moscow, 2015 photo Results. CEO turnover -performance OVERALL SAMPLE:
Negative relationship: Market value based performance-CEO turnover (at 5%)
Book value - based : not significant SUBSAMPLES:
LARGE SHAREHOLDERS (OLIGARCH):
Book value- based performance :negative significant (at 5%), market value – based: NOT significant
The power of influence: Marginal effects (the of CEO turnover changes, if the variable increases by 1pp)
ROA – provides 0.18pp STATE CONTROLED:
Market value - based performance negative and significant based
Marginal effects lower: 0,07pp<br>
slide17. * - significance at 1% level; ** - significance at 5% level; *** - significance at 10% level Higher School of Economics , Moscow, 2015 Results. СEO turnover<br>
slide18. Higher School of Economics , Moscow, 2015 photo Results. CEO turnover and HC OVERALL SAMPLE:
HC CEO is significant driver:
CEO age (proxy for general skills) negative sign: the younger, the higher the probability of CEO dismissal
For “oligarch” subsample: the negative coefficient is even higher
The CEO education ( technical and economic )- proxy for specific skills at 5%: the probability of dismissal is higher in state-controlled
(65% were with techinical education related to the industry)<br>
slide19. Higher School of Economics , Moscow, 2015 Results. CEO characteristics Confirmed This result matches with the results Conyon (1998) and Jensen and Murphy (1990). We confirmed this hypothesis for the subsample of state-affiliated companies This can be explained by the specific feature of USSR educational system, when the alumni of the universities were distributed by the state to the exact companies in different regions depending on their specialization and on the labor demand.<br>
slide20. Higher School of Economics , Moscow, 2015 Higher School of Economics , Moscow, 2015 Results. Chairman changes is rejected. The results contradict to Liu, Wang, Zhao and Ahlstrom (2013) ONLY frequency of meetings matters<br>
slide21. Higher School of Economics , Moscow, 2015 Conclusion CEO turnover in Russia Using Russian market we supported that CEO can be dismissed if company has poor performance. That support previous researches on emerging and developed markets.<br>
slide22. Further research Higher School of Economics , Moscow, 2015 RESEARCH PERSPECTIVES:
Performance - board changes (outside? Inside?) and in what cases this relationship works.
To investigate how board composition influence on performance-turnover relations
Specify CEO and Board characteristics HC and their influence
Compare to other EM Higher School of Economics , Moscow, 2015<br>
slide23. 20, Myasnitskaya str., Moscow, Russia, 101000
Tel.: +7 (495) 628-8829, Fax: +7 (495) 628-7931
www.hse.ru<br>