Stock Market Reactions to Announcements of Board of Director Appointments: Evidence from Italy

Fabrizio Rossi and Richard Cebula ()

MPRA Paper from University Library of Munich, Germany

Abstract: The Board of Directors plays an important role in corporate governance. It is an internal mechanism that controls and monitors the actions of managers and aligns the utility functions between corporate owners and managers. The board of directors performs multiple functions that concern, for example, the replacement of the managers, financial policy, the preparation of strategic plans, and other actions that affect the performance of the firm. The board plays an important role since on the one hand it controls the actions of management and on the other it advises management regarding the strategies to be adopted. In this study, 100 announcements for the appointment to the board of directors of 100 Italian listed public companies during the period 2012-2014 are investigated. The results show a positive reaction within 20 days around the announcement date of the appointments. In four of the six study periods, Cumulative Abnormal Returns (CARs) are positive and statistically significant. The difference between the sub-sample composed of a higher presence of women, non-executives, and independents on the Board of Directors does not seem to perform better than the one composed of a smaller presence of women, non-executives, and independents.

Keywords: stock market reactions; rates of return; announcements of boards of directors (search for similar items in EconPapers)
JEL-codes: G10 G30 G32 (search for similar items in EconPapers)
Date: 2013-09-05
New Economics Papers: this item is included in nep-cfn and nep-upt
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