Riding Off into the Sunset: Organizational Sensegiving, Shareholder Sensemaking, and Reactions to CEO Retirement

31 Pages Posted: 6 Oct 2017

See all articles by Hansin Bilgili

Hansin Bilgili

Kansas State University

Joanna Tochman Campbell

University of Cincinnati

Alan E. Ellstrand

California State University, Long Beach

Jonathan L. Johnson

University of Arkansas - Sam M. Walton College of Business

Date Written: November 2017

Abstract

We test hypotheses derived from resource dependence and sensemaking/sensegiving theoretical lenses in the context of CEO succession, focusing on an under‐researched yet prevalent type of executive turnover – CEO retirement. Using event study methodology and a sample of CEO retirements from S&P 1500 firms during the 2003–12 period, we find that, all else equal, shareholders’ perceptions of organizations’ capacity to serve their interests are adversely affected when a retirement related change occurs in the leadership structure. Specifically, in line with resource dependence theory, we find that CEO retirement disclosures typically generate negative abnormal returns. Furthermore, in line with the sensemaking perspective, we find that the magnitude of shareholders’ reactions is contingent on the lexical sensegiving cues contained in the organizational narratives that are released to capital markets via executive retirement announcements. Overall, our theory and results point to CEO retirement events as consequential in the eyes of shareholders, challenging an important assumption of extant succession research. Moreover, they suggest that shareholders’ interpretation of these events is influenced by organizational sensegiving, highlighting the important role of organizational communication around succession events.

Keywords: CEO, event study, retirement, resource dependence, sensemaking, sensegiving, succession

Suggested Citation

Bilgili, Hansin and Tochman Campbell, Joanna and Ellstrand, Alan E. and Johnson, Jonathan L., Riding Off into the Sunset: Organizational Sensegiving, Shareholder Sensemaking, and Reactions to CEO Retirement (November 2017). Journal of Management Studies, Vol. 54, Issue 7, pp. 1019-1049, 2017, Available at SSRN: https://ssrn.com/abstract=3048580 or http://dx.doi.org/10.1111/joms.12264

Hansin Bilgili (Contact Author)

Kansas State University

Manhattan, KS 66506-4001
United States

Joanna Tochman Campbell

University of Cincinnati

Cincinnati, OH 45221-0389
United States

Alan E. Ellstrand

California State University, Long Beach ( email )

1250 Bellflower Blvd
Long Beach, CA 90064
United States
310-985-4557 (Phone)
310-985-4358 (Fax)

Jonathan L. Johnson

University of Arkansas - Sam M. Walton College of Business ( email )

Fayetteville, AR 72701
United States
501-575-6227 (Phone)
501-575-7687 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
1
Abstract Views
288
PlumX Metrics