Chief Executive Officer Changes Research Articles

Hedging Around a CEO Change: Further Evidence from the Oil and Gas Industry

This study examines hedging activities around hiring of chief executive officer (CEO). Data on the use of derivatives by a sample of oil and gas firms were hand collected from the 10-k filings and compared for several years before and after a CEO change. A regression method was employed to examine if hedging is associated with the CEO change after controlling for the effects of hedging variables. The findings show that net hedging decreased from three years prior to CEO hiring and increased for several years thereafter. The regression results show that hiring of a new CEO explains change in hedging one year after the CEO is hired when interactions among the explanatory variables are considered. This is one of the few studies that examine the relationship between hedging behavior and CEO change.

The Impact of CEO Change on Enterprise Performance

The chief executive officer (CEO) is the enterprise's leader and plays a crucial role in business growth. Thus, the impact of the CEO changeover on the company and the selection of a suitable replacement are equally crucial considerations. This research utilizes data from Shanghai and Shenzhen-listed corporations. Using China's shares from 2010 to 2019 as the primary sample and earnings per share (EPS) as the performance indicator, we examine the influence of CEO turnover and succession sources on the company's performance. This research examines the pertinent literature and concludes that there are numerous elements that influence corporate performance, such as CEO turnover, firm size, debt ratio, etc. Several control variables are selected to develop an econometric model in order to control the influence of other factors affecting independent variables and dependent variables. This paper focuses on empirical analysis, does descriptive statistical analysis and multiple regression analysis, and employs the PSM-DID model for robustness testing in order to investigate the effect of CEO change on firm performance. After accounting for the endogenous or self-selection bias of the control sample, the study indicated that CEO turnover has a detrimental effect on company performance. From the standpoint of succession types, the corporate performance of listed companies with external successors is inferior to that of publicly traded companies with internal successors. On the basis of the above empirical findings, this study makes related recommendations for the current corporate management practice in China.

CEO DEĞİŞİMİ: ŞİRKET İÇİNDEN VEYA ŞİRKET DIŞINDAN ATAMANIN ŞİRKET BAŞARISINA ETKİSİ

This study examines the performances of insider and outsider CEOs (Chief Executive Officer) based on the top 100 companies in 2021 issue of the Brand Finance Turkey report. Each company has executive managers who plan and manage strategies to advance within the scope of the relevant mission and vision. The influence of managers, known as CEO or General Manager, is of great importance to the company. The article examined CEOs, financial statements and share values of the top companies traded in Istanbul Stock Exchange between the years 2010-2019. Assuming that all other conditions are equal, the impact of relevant CEOs appointed from inside or outside the firm, on the company's success had been studied. ROA (Return on Assets), ROE (Return on Equity) calculations and the change in the Borsa Istanbul share prices of each company in terms of each CEO change for the related years have been analyzed. In addition, the number of CEOs along with their tenure were also calculated. t-Test was used on the data. In conclusion CEO’s internal and external appointment had little to no impact on the company's success and share value.

Precarious situations: A prelude to hiring more hubristic chief executive officers

AbstractResearch SummaryWe build upon evidence suggesting the precariousness of the situation organizations face when trying to fill chief executive officer (CEO) openings affects both which executives seek and accept such positions and which executives are sought and endorsed by those tasked with hiring. We argue that while more precarious situations likely deter some executives from pursuing and/or accepting such opportunities, more hubristic executives' tendencies make them likely to do so despite the associated challenges. Concordantly, those tasked with filling CEO openings likely view more hubristic executives as particularly important for combatting the challenges of more precarious situations, leading them to seek and endorse such executives. Using multiple conceptualizations of precarious situations, we find support for our arguments in a sample of CEO changes in S&P 500 firms.Managerial SummaryWhy do organizations select more hubristic executives to fill CEO openings? We answer this question by highlighting the role that situational precariousness plays. Specifically, not all CEO openings are equally attractive to prospective CEOs and not all prospective CEOs are equally attractive to decision makers tasked with filling such openings. We argue and find support for the notion that more hubristic executives' tendencies make them more likely to pursue and accept CEO opportunities at organizations in more precarious situations while those tasked with filling CEO openings likewise believe more hubristic executives' tendencies are particularly important given the precarious situations those organizations face. Our findings advance knowledge of CEO hubris and provide insights for practice.

Pergantian Kantor Akuntan Publik: Analisis Berdasarkan Pergantian CEO Dan Opini Audit Modifikasi

This study aims to determine the factors that can affect the turnover of Public Accounting Firms. The factors used are CEO (Chief Executive Officer) changes and audit opinions. The population of this study is mining companies listed on the Indonesia Stock Exchange (IDX) from 2016 to 2020. To obtain samples with the required criteria use the purposive sampling method. Hypothesis testing is done by logistic regression due to the dependent variable, which is the change of public accounting firm used is a dummy. The results of this test indicate that (1) the CEO (Chief Executive Officer) change has a significant effect on the change in the Public Accounting Firm (2) Audit opinion has no significant effect on the change in the Public Accounting Firm.

Change gears before speeding up: The roles of Chief Executive Officer human capital and venture capitalist monitoring in Chief Executive Officer change before initial public offering

AbstractResearch SummaryWith data on 1,156 venture capitalist (VC)‐backed U.S. initial public offerings (IPOs), we find that the initial level of Chief Executive Officer (CEO) human capital (HC) when a firm receives its first VC investment is negatively related to the likelihood of changing CEO before IPO. The distance between a firm and its lead VC has a positive effect on the likelihood and this effect is stronger when the initial CEO HC is lower. These results suggest that as a larger distance amounts to greater cost of VC direct monitoring, VC is more compelled to change CEO, especially when initial CEO HC is lower. Controlling for the endogeneity of CEO change, we find that CEO change before IPO has a positive relationship with the firm's IPO valuation and changes in operating performance.Managerial SummaryChanging CEO prior to IPO is common in startups, especially in those backed by VCs. We argue that VC can monitor a portfolio firm in two ways (which are not mutually exclusive): directly monitoring onsite the firm and indirectly monitoring relying upon the firm's top management especially CEO. We propose and find empirical evidence to support that as a larger distance between a firm and its lead VC amounts to greater cost of direct monitoring and thus making direct monitoring less feasible, the VC is more compelled to change CEO, especially when the CEO is deemed less capable (i.e., having a lower level of human capital). We also find that CEO change before IPO increases a firm's IPO valuation and changes in operating performance.

SENTIMENT MARKET ANALYSIS ON REPLACEMENT ANNOUNCEMENT OF CHIEF EXECUTIVE OFFICER (CEO)

This study examines the market reaction to the announcement of Chief Executive Officer (CEO) measured by abnormal return. The study sample consisted of 55 CEO turnover announcements using the t-test to test information content of the announcement. The author groups the changes into two factors: (1) change process (routine and non-routine) and (2) substitute origin (inside and outside). The market reacts significantly positively to the announcement of CEO turnover routinely with the origin of the replacement from inside (inside) the company. Different reactions occur in the announcement of routine outside and non-routine insidediary CEO turnover where announcements are responded negatively and significantly. The market does not react to the announcement of non routine outside CEO changes. These results show that investors in Indonesia react positively to routine CEO turnover inside because investors believe that new CEOs will continue their strategy and leadership style and have lower levels of uncertainty. Negative reactions to routine outside CEO turnover are caused by the market belief that the successor will not continue the previous CEO's strategy and has a high degree of uncertainty. The cause of a negative market reaction to the announcement of a non-routine inside CEO turnover is that a replacement CEO will continue the old leadership style and jointly be responsible for the company's poor performance.

Management Risk Incentives and the Readability of Corporate Disclosures

AbstractManagers with higher risk incentives (greater options vega) issue less readable disclosures. Firms in the top quartile of vega file annual reports that are about 15.4% more voluminous than those in the bottom quartile. The effect of vega on obfuscation remains after controlling for firm risk, operating complexities, accounting and auditor choices, chief executive officer changes, and an exogenous shock to option compensation. This effect is tempered by higher institutional ownership, lower management entrenchment, and greater analyst following. Obfuscation benefits managers by increasing return volatility (option value) and allowing greater earnings management. These findings document a new link between options and disclosure transparency.

CEO Characteristics and Timeliness of Financial Reporting of Vietnamese Listed Companies

CEO Characteristics and Timeliness of Financial Reporting of Vietnamese Listed Companies

Shaped by their daughters: Executives, female socialization, and corporate social responsibility

Corporate executives managing some of the largest public companies in the U.S. are shaped by their daughters. When a firm’s chief executive officer (CEO) has a daughter, the corporate social responsibility rating (CSR) is about 9.1% higher, compared to a median firm. The results are robust to confronting several sources of endogeneity, e.g., examining first-born CEO daughters and CEO changes. The relation is strongest for diversity, but significant also for broader pro-social practices related to the environment and employee relations. Our study contributes to research on female socialization, heterogeneity in CSR policies, and plausibly exogenous determinants of CEOs’ styles.

The role of Chief Executive Officer (CEO) in Corporate Governance and Earnings Management

Abstract. This research was conducted to provide evidence on the effect of CEO change and CEO’s tenure along on earnings management. Hence, a sample composed of 108 companies listed on Tehran Stock Exchange was selected and evaluated during a period of 9 years (2004-2012). To test hypotheses, the approach of combined data was used. In this research, using the modified Jones model, discretionary accruals were estimated. The results indicated that there was a positive and significant relationship between the CEO change and earnings management. They are also indicative of a negative and significant relationship between the CEO’s tenure and earnings management.

Analysts' Forecasts Following Forced CEO Changes

This paper examines analysts' earnings forecasts during the period of uncertainty following a change of chief executive officer (CEO). It distinguishes between forced and non‐forced CEO changes, and examines whether analysts utilize their information advantage to reduce the heightened uncertainty of a forced change of CEO. Examining a sample of Australian companies followed by analysts between 1999 and 2009, we find that forecasting accuracy is lower and earnings forecasts are more optimistic for firms experiencing forced CEO turnover compared to firms not undergoing such a change. However, dispersion is not statistically different. The results suggest that forced CEO turnover events provide a challenge to the forecasting environment for analysts. During CEO changes, investors should be aware that forecasts are less accurate and have an optimistic bias.

Earnings management following chief executive officer changes: the effect of contemporaneous chairperson and chief financial officer appointments

AbstractUsing a sample of listed Australian firms from 1999 to 2007, we examine the relationship between discretionary accruals and concurrent senior management appointments. Employing panel data regression models and focusing on a measure of discretionary accruals that excludes the effect of transparent write‐downs such as restructuring charges, we find that chief executive officer (CEO) appointments, as a general phenomenon, are not significantly associated with opaque earnings management in the year of appointment or the following year. However, we find that CEO changes accompanied by a concurrent change in board chairperson are associated with significant income‐decreasing earnings management in the year of appointment. We detect no significant relationship between contemporaneous CEO and chief financial officer changes and discretionary accruals. We find no evidence of earnings management in the first compete financial period following CEO appointment, regardless of whether or not concurrent Chair or chief financial officer appointments occurred.

Sudden CEO vacancy and the long‐run economic consequences

PurposeThe aim of this paper is to examine the long‐term abnormal returns of firms that have experienced chief executive officer (CEO) succession. According to Chief Executive magazine, directors rank CEO succession as the second most important issue their firms face, the first being strategic planning.Design/methodology/approachThis study examines 202 CEO succession announcements. It utilizes two returns‐generating models to calculate abnormal returns for two estimation windows of 200 trading days before and after the succession event.FindingsThe results support the theory first developed by Guest (1962) that succession is an adaptive event. Specifically, this study shows that firms that experience a CEO change have positive abnormal returns, suggesting that new CEOs raise the firm performance. Moreover, this study shows that firms that experience CEO change due to CEO retirement improve firm performance in the post‐succession period, whereas succession due to CEO sudden death or illness seems to have no direct effect on the long‐term performance of these firms. Finally, this study provides strong evidence that outside successions help firms raise performance more than inside successions.Research limitations/implicationsLike any empirical event‐study, the validity of the results depends on the absence of confounding events. Future research could be to explore the relationship between the information content of the CEO succession announcement and the market reaction.Originality/valueThis paper is believed to be the first attempt to empirically examine the relation between CEO turnover and long‐term firm performance through the analysis of the successor's origin and of the force initiating the change, by using an event study methodology.

Tenure, firm's performance, and CEO's compensation

PurposeThe purpose of this paper is to assess the association between Chief Executive Officer (CEO) tenure, compensation, and firm's performance.Design/methodology/approachThe paper compares the influence firms' performance on CEOs' cash and total compensation based on the length of tenure. It also examines pay–performance relationship for new CEOs vs those serving their last year in such positions.FindingsThe firm size appears to be a significant explanatory variable for CEOs' cash and total compensation regardless of CEOs tenure and measure of performance. Additionally, firms' performance is a significant determinant of cash compensation for CEOs during the first three years of their work as CEOs and not significant for those with 15 years or more as the company's CEO. Both market‐based and accounting‐based performance measures are negatively correlated with CEOs' total compensation regardless of length of experience.Research limitations/implicationsThis study did not differentiate routine CEO changes, i.e. normal retirement, from the non‐routine ones. Additionally, the results may be limited by the temporal nature of the sample. Future studies dealing with CEO turnover should cover a longer period of CEO' tenure and examine the nature of CEO's dismissal. Such a research design may provide additional insight to the CEO compensation and influence of performance measures in executive contracts.Originality/valueThis research offers some evidence in support of CEO incentives relative to the length of service as the firm's CEO. The findings indicate differences in pay–performance sensitivities on the basis of CEO's tenure. Comparing the pay–performance relationship for individuals serving their first year and those serving their last year as the firm's CEOs, the paper detects statistically significant differences in influence of performance on cash compensation.

Should state-owned firms change CEOs before privatization? Some evidence from the telecommunications industry

Should state-owned enterprises change chief executive officer (CEO) before privatizing? We test competing views on this question by complementing a recently released database with newly collected data. We are able to cover 77 telecommunications privatizations, which account for nearly 80% of the sector in terms of value. We find that CEO replacement will improve performance in the telecommunications industry before privatization as measured by penetration, operating efficiency and profitability. Chief executive officer change before privatization does appear to have real consequences in firm performance before privatization.

Financial distress and corporate governance: an empirical analysis

Relationships between corporate governance characteristics and financial distress status are examined for a sample of Canadian firms. Results from logit regression analysis of 46 financially distressed and 46 healthy firms lead us to conclude that the board of director’s composition explains financial distress, beyond an exclusive reliance on financial indicators. Additionally, supplemental results indicate that outside directors’ ownership and directorship affect the likelihood of financial distress. Furthermore, splitting financially distressed firms based on chief executive officer change as a proxy of turnaround strategies provides useful insights on corporate governance characteristics in financial distress.

Divisional sell‐off: A hazard function analysis

AbstractFor a sample of roughly 450 companies, hazard function estimation is used to determine the environmental and organizational variables precipitating the ‘sell‐off’ of divisional units. The sample focuses on 285 ‘lines of business’ fully divested between 1975 and 1981, comparing them to 2157 retained lines. The most powerful sell‐off predictor was prior profitability at the line of business level; the lower profits, the higher the sell‐off probability. Also, divestiture was more likely, the lower company‐wide profitability, the lower a line's market share, the lower the line's R&D/sales ratio, and in the aftermath of a company chief executive officer change. Units previously acquired in conglomerate mergers were more likely to be sold off than original units. On the buyer's side of the sell‐off market, large companies acquiring other firms' divested units tended to improve the units' profit performance, but not enough, on average, to realize a normal return on their investments.