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The impact of founder turnover on firm performance: an empirical study in China

The impact of founder turnover on firm performance: an empirical study in China Purpose – The purpose of this paper is to assess the immediate and lagged effects of founder's turnover on firm performance, and test the moderating effects of enterprise scale and founders' tenure on enterprise performance. Design/methodology/approach – The paper selects 307 listed companies founded by founder from the Listed Company's Financial Database provided by the China Center for Economic Research. Based on 1,535 observations, this paper tests the relationship between founder turnover and performance by using the random effect model and the fixed effect model. Findings – It is found that founders' turnover will have a significant immediate and negative effect on firm performance. There exists a lagged effect of founders' turnover, but this lagged effect is not as strong as immediate effect. It is also found that the effect of founders' turnover has been moderated by firm size and founders' characteristics. Practical implications – Founders should choose an appropriate time of leaving when the firm's performance has reached a level high enough for the successor to have a better chance of improving its future operations. Originality/value – Although some scholars have recognized the special role of founders and that enterprises' performances are mainly determined by the founders, few have studied founders' turnover on firm performance directly and empirically. This paper expands understanding of the founders' departure behavior on firm performance. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Chinese Entrepreneurship Emerald Publishing

The impact of founder turnover on firm performance: an empirical study in China

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References (66)

Publisher
Emerald Publishing
Copyright
Copyright © 2010 Emerald Group Publishing Limited. All rights reserved.
ISSN
1756-1396
DOI
10.1108/17561391011051135
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to assess the immediate and lagged effects of founder's turnover on firm performance, and test the moderating effects of enterprise scale and founders' tenure on enterprise performance. Design/methodology/approach – The paper selects 307 listed companies founded by founder from the Listed Company's Financial Database provided by the China Center for Economic Research. Based on 1,535 observations, this paper tests the relationship between founder turnover and performance by using the random effect model and the fixed effect model. Findings – It is found that founders' turnover will have a significant immediate and negative effect on firm performance. There exists a lagged effect of founders' turnover, but this lagged effect is not as strong as immediate effect. It is also found that the effect of founders' turnover has been moderated by firm size and founders' characteristics. Practical implications – Founders should choose an appropriate time of leaving when the firm's performance has reached a level high enough for the successor to have a better chance of improving its future operations. Originality/value – Although some scholars have recognized the special role of founders and that enterprises' performances are mainly determined by the founders, few have studied founders' turnover on firm performance directly and empirically. This paper expands understanding of the founders' departure behavior on firm performance.

Journal

Journal of Chinese EntrepreneurshipEmerald Publishing

Published: Jun 8, 2010

Keywords: Business performance; China; Business enterprise; Business formation; Succession planning

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