Stock Market Reaction to CEO Appointment – Preliminary Results

Byrka-Kita Katarzyna (), Mateusz Czerwinski () and Preś-Perepeczo Agnieszka ()
Additional contact information
Preś-Perepeczo Agnieszka: University of Szczecin, Faculty of Economics and Management, Institute of Finance, Department of Financial Management, 64 Mickiewicza St., 71-101 Szczecin, Poland

Journal of Management and Business Administration. Central Europe, 2017, vol. 25, issue 2, 23-42

Abstract: Purpose: The aim of this paper is to examine shareholders′ reaction to the decision of the supervisory board to appoint a CEO in companies listed on the Warsaw Stock Exchange. Methodology: An event study and the mean-adjusted model were applied. The abnormal returns were measured as the CAAR in the entire (-60, + 60) window and selected sub-windows. Findings: The obtained values of abnormal returns indicate the shareholder’s negative reaction. Throughout the observation window, they oscillate slightly below zero, and in the window (0, +20) they are negative at -1.566%. Irrespective of the observation window, negative abnormal returns were obtained for over half of the observation (52-57%). Therefore, preliminary results indicate the predominance of the information effect over the real one. The decrease in market value as a result of the event may result from an increase in investors′ uncertainty as to the effects of changes in strategy and skills of the new CEO. Originality: The research is a unique one. To date, no one has carried out research into shareholders′ reaction to a CEO appointment in either the Polish or Central and Eastern European capital markets. They primarily bring the value of cognition of shareholders′ behaviour in the analysed event, which is reflected in share prices. They extend the literature on the signalization instruments, i.e. the activities that boards can undertake due to the new information transmitted to the capital market participants and stakeholders. The market reaction to a CEO appointment will without a doubt interest investors; the institutions responsible for supervision (which in the case of Poland is the Financial Oversight Commission) and the legislator in charge of regulations that prevent insider trading while promoting corporate disclosure transparency.

Keywords: CEO appointment; abnormal return; event study (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.7206/jmba.ce.2450-7814.194 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:vrs:jmbace:v:25:y:2017:i:2:p:23-42:n:3

DOI: 10.7206/jmba.ce.2450-7814.194

Access Statistics for this article

Journal of Management and Business Administration. Central Europe is currently edited by Pawel Korzynski

More articles in Journal of Management and Business Administration. Central Europe from Sciendo
Bibliographic data for series maintained by Peter Golla ().