Abstract
This paper presents a fresh perspective on chief executive officer (CEO) turnover, where the impact of CEO turnover on firm value is analysed based on whether the removal is planned or unplanned. A total of 146 announcements for ten years in Malaysia is examined using an event study method. The results indicate that, in general, CEO turnover announcements cause a significant reaction due to changes in the firm’s investment decisions. Specifically, a significant positive impact exists when CEO turnover occurs as planned. In a planned turnover, the negative news of the removal of the CEO is immediately minimised with the positive news of a CEO appointment, indicating the positive impact of establishing a CEO succession plan on firm value. This finding adds new knowledge to the current literature and allows policymakers to examine the establishment of a CEO succession policy.
Highlights
This paper presents a fresh perspective on chief executive officer (CEO) turnover, where the impact of CEO turnover on firm value is analysed based on whether the removal is planned or unplanned
The results indicate that, in general, CEO turnover announcements cause a significant reaction due to changes in the firmâ€TMs investment decisions
The negative news of the removal of the CEO is immediately minimised with the positive news of a CEO appointment, indicating the positive impact of establishing a CEO succession plan on firm value
Summary
This paper presents a fresh perspective on chief executive officer (CEO) turnover, where the impact of CEO turnover on firm value is analysed based on whether the removal is planned or unplanned.
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