CEO Turnover Announcements and Information Frictions

51 Pages Posted: 12 May 2020 Last revised: 10 Sep 2020

See all articles by Kose John

Kose John

New York University (NYU) - Department of Finance

Y. Christine Liu

University of Toronto - Rotman School of Management

Xu Tian

Department of Finance, Terry College of Business, University of Georgia

Haofei Zhang

Nankai University - School of Finance

Date Written: January 22, 2018

Abstract

This paper analyzes the market reaction to CEO turnover announcements in the presence of information frictions. We find that the market reaction to forced CEO turnover announcements is negatively related to the level of asymmetric information between a firm and its investors. No such relation exists for voluntary turnovers. We also find that in cases where information frictions are high, companies attempt to present forced turnover as voluntary and this behavior leads to a less negative market response. Overall, our results suggest that firms act strategically when disclosing information about CEO turnover to avoid a negative market reaction.

Keywords: CEO turnover, information asymmetry, corporate governance, information disclosure, market reaction.

JEL Classification: G14; G30; G34

Suggested Citation

John, Kose and Liu, Y. Christine and Tian, Xu and Zhang, Haofei, CEO Turnover Announcements and Information Frictions (January 22, 2018). NYU Stern School of Business, Available at SSRN: https://ssrn.com/abstract=3578104 or http://dx.doi.org/10.2139/ssrn.3578104

Kose John

New York University (NYU) - Department of Finance ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States
212-998-0337 (Phone)
212-995-4233 (Fax)

Y. Christine Liu

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Xu Tian (Contact Author)

Department of Finance, Terry College of Business, University of Georgia ( email )

620 S Lumpkin St
Athens, GA 30602
United States

HOME PAGE: http://www.xutianur.com

Haofei Zhang

Nankai University - School of Finance ( email )

38 Tongyan Road, Jinnan District
Tianjin, Tianjin 300350
China

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