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Chief Executive Officer Succession and Financial Constraints: Evidence from China
Author(s) -
Zhao Xi,
Ma Huanyu
Publication year - 2017
Publication title -
asia‐pacific journal of financial studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.375
H-Index - 15
eISSN - 2041-6156
pISSN - 2041-9945
DOI - 10.1111/ajfs.12181
Subject(s) - chief executive officer , cash flow , business , china , officer , panel data , finance , ecological succession , cash , investment (military) , monetary economics , economics , management , ecology , politics , political science , law , econometrics , biology
Abstract This study investigates the impact of Chief Executive Officer ( CEO ) succession on a firm's financial constraints. Using panel data consisting of CEO turnover and non‐turnover cases of listed companies in China, we find that new CEO s play a significant role in alleviating a firm's financial constraints. Specifically, the level of cash holdings, the investment to cash flow sensitivity, and the cash to cash flow sensitivity all decline following a new CEO 's succession. These effects are stronger in cases where the turnovers are forced and the firms are more financially constrained.