Does CEO Succession Planning (Disclosure) Create Shareholder Value?

Abstract

Cumulative abnormal returns around proxy statements containing “in-depth” disclosures of planning for CEO succession are significantly positive indicating that succession planning is a value-adding undertaking. Further analyses, including exploiting a 2009 SEC ruling that induced more disclosures of succession planning, indicate that succession planning is not a one-size-fits-all undertaking in that succession planning is value-enhancing only for larger, older, more complex firms with lower stock return volatility. Other analyses support that in-depth disclosure of succession planning is a credible signal of actual planning and that in-depth disclosure of succession planning is value-reducing for firms that “should not” plan for succession.

Keywords: CEO succession, CEO turnover, proxy statement disclosures