Abnormal Stock Returns and Volume Activity Surrounding Lodging Firms' CEO Transition Announcements

Barry A.N. Bloom and Leonard A. Jackson
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Barry A.N. Bloom: Executive Vice President & Chief Operating Officer, Xenia Hotels & Resorts, Inc, 200 S. Orange Avenue, Suite 1200, Orlando, FL 32801, USA
Leonard A. Jackson: Cecil B. Day School of Hospitality Administration, J. Mack Robinson College of Business, Georgia State University, 35 Broad Street, Suite 214, Atlanta, GA 30303, USA

Tourism Economics, 2016, vol. 22, issue 1, 141-161

Abstract: This research empirically investigates the impact of lodging firms' chief executive officer (CEO) transition announcements on stock performance and trading activity. Specifically, the study utilizes both parametric and non-parametric event study measures to investigate abnormal stock returns and volume activity during the periods surrounding the announcement of CEO transitions at lodging firms. The study finds significant negative abnormal returns in the periods before and after the announcement of a CEO transition. This suggests that the market did not perceive CEO transitions at lodging firms as value-enhancing events. Regarding trading volume, the study finds a decline in trading activity thirty days prior to announcement, but high trading activity during the immediate period surrounding announcements (5 days before the announcement date and 5 days after). This suggests investor uncertainty regarding the direction and value of the stocks of sampled firms. To minimize the negative impact on stock price and trading volume, it is important that lodging firms plan CEO transitions carefully and provide sufficient and timely information to stakeholders about new CEOs, their background and the value they will add to the firm. Such actions could assuage the negative impact of CEO transition announcement on firm value.

Keywords: CEO transition announcement; lodging stocks; event study (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:toueco:v:22:y:2016:i:1:p:141-161

DOI: 10.5367/te.2014.0418

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