Timely vs. Delayed CEO Turnover
Information Systematic Frontier 2017, 19(3), 469-479.
26 Pages Posted: 14 Sep 2017
Date Written: September 12, 2017
This paper investigates changes in company performance following timely versus delayed CEO resignations due to financial wrongdoings. A timely resignation is proactively pushed by the company, and a delayed resignation is driven by investigations initiated by the SEC or other regulatory authorities. Our results show significant negative abnormal returns following the announcement of CEO resignations. In addition, compared with timely resignations, delayed resignations experience a larger and longer lasting negative stock market reaction. This suggests that CEO resignations due to financial wrongdoings are not perceived as good news by investors, and the delayed resignations could make investors lose more confidence, possibly because of worries about the ineffective corporate governance and supervision mechanism. We have found a significant negative relationship between CEO-chairman duality and the timeliness of CEO resignations. Our results have important implications for investors and policy makers.
Keywords: Duality; Financial Wrongdoing; CEO Turnover; CEO Resignations
JEL Classification: G34; G14
Suggested Citation: Suggested Citation