소유구조와 성과기준에 따른 최고경영자 교체

Using the firms listed in the Korea Stock Exchange between 2002 and 2007, this paper examines the effect of ownership structure on the sensitivity of CEO turnover to performance benchmarks. We define the performance benchmarks as industry-adjusted ROA, avoiding loss, and beating analysts’ earnings forecasts. The corporate ownership structure of many Korean firms is characterized by Chaebol, the Korean form of business conglomerate, or controlling shareholders who exercise nearly complete control over managers. If a controlling shareholder or a member of Chaebol is CEO, the probability of CEO turnover might be low. Thus we focus on employed CEO who is not owner. Prior studies define that there are three earnings thresholds that managers seek to achieve; ⑴ avoid losses, ⑵ avoid decreases in earnings and ⑶ avoid negative earnings surprises. Moreover, recent studies suggest that meeting or beating analyst forecasts is the most important benchmark for firms and further, firms are likely to manipulate earnings to achieve such goal. Growth stock strategists state that management attempts to be conservative in its earnings guidance as a result of how severely stocks are punished when earnings disappoint. The major reasons managers seek to meet or beat market expectations are to build credibility with capital markets and to maintain their firms' stock prices. Prior studies report that Korean firms show the tendency to disclose bad news voluntarily prior to earnings announcements in order to prevent abrupt drop in stock prices. Korean firms manage their fourth quarter earnings in order to meet or beat analysts' forecasts. Thus, our paper expanded prior studies about CEO turnover, assumed that managers are mostly evaluated for their performance by firms’ ROA or net income, and analyzed the sensitivity of CEO turnover to meeting or beating analysts’ earnings forecasts. Ever since the Asian financial crisis in 1997, Korea has continuously worked on building systemic soundness within its financial market, with the aim of improving market transparency and fairness. Corporate governance attributes have generated significant public, media and regulatory attention with respect to corporate disclosure practices. Many studies have focused on the effect of corporate governance regarding firm performance around the time of the crisis. Existing disclosure requirements, which have contributed to the corporate collapses, have revealed inadequacies and indicated the need for greater representation of outside monitors. Naturally, after the crisis, foreign ownership and institutional ownership increased in Korea. Foreign ownership plays an important monitoring role in Korea, as observed by the increase in CEO turnover for poorly performing firms with higher foreign ownership following the economic shock in 1997-1998(Shin and Chang 2004). The empirical findings of this paper are following. First, we find that the probability of CEO turnover is increased as the industry-adjusted ROE is low, or the firm reports a loss. We find beating analysts’ earnings forecasts does not have significant effect on the CEO turnover. However, the sensitivity of CEO turnover to beating analysts’ earnings forecasts is stronger in the case of Chaebol group, the firms in which controlling shareholders’ ownership is high, and the firms with high foreign investors’ ownership. This result means that beating analysts’ earnings forecasts is one of the important performance benchmarks when the Board of Directors or investors estimate CEO. Second, we find that the sensitivity of CEO turnover to performance benchmakrs such as industry-adjusted ROA, avoiding loss, and beating analysts’ earnings forecasts increases as the foreign investors’ ownership increases. These findings support the monitoring hypothesis that foreign investors monitor the role of CEOs and replace CEOs when their performance benchmarks are not met. Finally, we find that CEOs of the affiliated firms with Chaebol are likely to be changed if they miss analysts’ earnings forecasts. In case of CEOs of the firms with larger shareholders’ ownership, they are likely to be changed if they report a loss or miss analysts’ earnings forecasts. These results imply that the importance of performance benchmarks based on the decision of CEO turnover could be different according to the firm’s ownership structure. Our paper contributes to a literature on CEO turnover to a performance for listed firms, the majority of which do not show consistent results on ownership structure in Korea and CEO turnover. Our findings that the sensitivity of CEO turnover to the performance benchmark such as beating analysts’ earnings forecasts is strengthen for firms included in Chaebol groups, with large shareholder ownership, and high foreign investors’ ownership, imply that managers focus on the performance benchmark, meeting or beating market expectations rather than the performance such as ROA, and/or net income. Therefore, our findings provide an important implications to not only investors and creditors but also regulators who are interested in managers’ behavior in the firms listed in the Korea Stock Exchange. Researchers who are interested in this area can also apply the discussion in this paper for the related studies.