Shareholder Wealth Effects of CEO Departures: Evidence from the UK
University of Bristol Working Paper No. 00/497
47 Pages Posted: 4 May 2001
Date Written: October 2000
This paper examines share price behaviour surrounding announcements of CEO departures from UK firms listed on the All Share Index between 1990 and 1995. We find that many firms choose not to announce CEO departures, and that these firms have poorer performance records, and higher chances of future failure, than those firms who officially announce CEO turnover to the London Stock Exchange. The market reacts negatively to announcements of top executive departures, especially when the CEO is dismissed or leaves to take up another job. Share price reactions to the disclosure of top executive departure are significantly affected by the financial risk of the firm and whether the board announces a replacement CEO.
Keywords: Corporate governance, managerial departure, board structure
JEL Classification: G0, G3
Suggested Citation: Suggested Citation