We examine CEO turnover and firm financial performance.
Accounting measures of performance relative to other
firms deteriorate prior to CEO turnover and improve
thereafter. The degree of improvement is positively
related to the level of institutional shareholdings, the
presence of an outsider-dominated board, and the
appointment of an outsider (rather than an insider)
CEO.Turnover announcements are associated with
significantly positive average abnormal stock returns,
which are in turn significantly positively related to
subsequent changes in accounting measures of
performance.This suggests that investors view turnover
announcements as good news presaging performance
improvements. pdf 2003
