CEO Departures and Market Uncertainty

52 Pages Posted: 21 Dec 2010 Last revised: 4 Jul 2013

See all articles by Jane Cheung

Jane Cheung

University of New South Wales (UNSW)

Andrew B. Jackson

UNSW Australia Business School, School of Accounting

Date Written: May 3, 2012


This study investigates the effect on stock return volatility of a significant event in the life of a firm, a change in its CEO. Citing weaknesses in the prior literature, we bring a new approach to re-examine the issue. First, we use a relatively unbiased classification system using both company announcements and media reports. Second, we use short-term stock return volatility as a more accurate estimator to isolate the effect of a single disclosure. We find strong evidence that the level of stock return volatility increases following announcements of CEO departures, and that the increase is significantly higher following announcements of forced departures compared to voluntary departures. The results are consistent with signalling effect theory in that forced dismissals convey previously unknown information to the market. Signed cumulative abnormal returns are also more negative for a forced CEO departure.

Keywords: CEO, Stock Return Volatility, Abnormal Returns

Suggested Citation

Cheung, Jane and Jackson, Andrew B., CEO Departures and Market Uncertainty (May 3, 2012). Australian Journal of Management, Volume 38, No. 2 (August 2013). Available at SSRN: or

Jane Cheung

University of New South Wales (UNSW) ( email )

High St
Sydney, NSW 2052

Andrew B. Jackson (Contact Author)

UNSW Australia Business School, School of Accounting ( email )

Sydney, NSW 2052

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