Top Management Turnover in Croatian State-Owned Companies

The character of the relationship between top management turnover and business performance is relevant in assessing the quality, efficiency and effectiveness of corporate governance. Efficiency of corporate governance is defined by the degree of governance structures' adjustment to poor performance. Efficient systems of corporate governance should replace poorly performing managers. In this aspect turnover-performance relationship can be viewed as an indicator of corporate governance efficiency. In this paper we analyze the turnover-performance relationship in Croatian state owned companies. Croatia, as a transitional economy, still has a relatively high share of state ownership. We find that reasons for top management turnover in Croatian state owned companies are primarily politically influenced and the results of our empirical research shows that there is a weaker relationship between forced turnover and performance in Croatian companies where the State is the dominant shareholder in comparison to privately owned companies.