The Impact of CEO Turnover on Financial Performance of Industrial Firms Listed on the Amman Stock Exchange

Abstract

The present study endeavors to examine the correlation between CEO turnover and the financial performance of industrial firms in Jordan. The primary objective of this research is to assess how changes in the Chief Executive Officer (CEO) position affect the financial performance of an organization. This investigation encompasses three specific aspects by analyzing the timing of CEO turnover events in relation to key financial performance (FP) indicators, namely Return on Assets (ROA) and Return on Equity (ROE). Utilizing financial data collected from 33 firms between 2017 and 2021, a panel data regression analysis was conducted to reach meaningful conclusions. The results indicate a negative relationship between CEO turnover and FP, regardless of the timing of CEO dismissal, which highlights the low tolerance for poor performance in industrial firms in Jordan. Furthermore, the study found that ROE serves as a more accurate predictor of CEO turnover compared to ROA. Based on these findings, the study formulates several conclusions and recommendations, as well as potential directions for future research.