Market Reaction to CEO Turnover: Empirical Evidence from Fortune 500 Firms
Journal Title: Global Finance Review - Year 2019, Vol 1, Issue 1
Abstract
This paper applies event study analysis to explore the impact of change in leadership on the market return of Fortune 500 firms. The study analyzes various market reaction following the announcement of CEO's departure along with the circumstances leading to it. The results show that on the occurrence of the event, market reacts positively in line with “ability hypothesis”. Especially inside succession comparatively found to provide better market reaction than outside succession. However the type of departure showed no statistically significant abnormal returns Further abnormal return prior to the event was witnessed suggesting information leak. Overall the study is consistent with Efficient Market Hypothesis.
Authors and Affiliations
Dipesh Karki, Binam Ghimire
Keywords
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