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

Xiaogang He (School of International Business Management, Shanghai University of Finance and Economics, Shanghai, People's Republic of China)
Zhixin Wang (School of International Business Management, Shanghai University of Finance and Economics, Shanghai, People's Republic of China)
Lin Mei (School of International Business Management, Shanghai University of Finance and Economics, Shanghai, People's Republic of China)
Yanling Lian (School of International Business Management, Shanghai University of Finance and Economics, Shanghai, People's Republic of China)

Journal of Chinese Entrepreneurship

ISSN: 1756-1396

Publication date: 8 June 2010

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.

Keywords

Citation

He, X., Wang, Z., Mei, L. and Lian, Y. (2010), "The impact of founder turnover on firm performance: an empirical study in China", Journal of Chinese Entrepreneurship, Vol. 2 No. 2, pp. 148-164. https://doi.org/10.1108/17561391011051135

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Publisher

:

Emerald Group Publishing Limited

Copyright © 2010, Emerald Group Publishing Limited

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