Stock Price Responses to Voluntary and Forced CEO Turnover
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Announcement Period Abnormal Return (-1,0)
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Origin of the New CEO
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(2)
Observations in Which the Percentage of Outside Board Members is Below the Sample Median
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(3)
Observations in Which the Percentage of Outside Board Members is Above the Sample Median
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Voluntary Successions:
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New CEO is Promoted from Inside the Firm
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0.21%
(2.07)
[457]
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0.13%
(1.04)
[222]
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New CEO is Hired from Outside the Firm
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0.67%
(2.48)
[78]
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0.94%
(3.32)
[38]
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0.42%
(0.22)
[40]
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Forced Successions:
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New CEO is Promoted from Inside the Firm
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-0.85%
(-3.08)
[37]
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-0.20%
(-1.18)
[20]
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-1.63%
(-3.27)
[17]
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New CEO is Hired from Outside the Firm
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1.64%
(3.37)
[46]
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0.69%
(0.83)
[14]
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2.06%
(3.49)
[32]
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Total Successions
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[618]
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[307]
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[311]
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Announcement-period abnormal returns associated with a sample of 618 CEO successions at large public firms between 1970 and 1988. The abnormal returns are calculated over the two-day period including the day of and the day prior to the succession announcement. CEOs who vacate the position prior to age 60 and do not leave for other employment or for health reasons and CEOs reported by the Wall Street Journal to have been forced from their position are classified as having been forced out. CEOs who are employed outside the firm within three years of the succession are classified as hired from outside the firm. Abnormal returns are calculated using the procedure described by Dodd and Warner (1983) with the market model parameters estimated over the 200-day period ending 60 days before the succession announcement. t-statistics for the cumulative standardized prediction errors are reported in parentheses. The number of observations is in square brackets.
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