Impact of Chief Executive Officer (CEO) Succession Policy on CEO Turnover Announcement in Malaysia

Shubasini Sivapregasam, Aslam Izah Selamat (), Norhuda Abdul Rahim and Junaina Muhammad
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Shubasini Sivapregasam: Putra Business School, Universiti Putra Malaysia, Jalan UPM, 43400 Serdang, Selangor, Malaysia
Aslam Izah Selamat: School of Business and Economics, Universiti Putra Malaysia, 43400 Serdang, Selangor, Malaysia
Norhuda Abdul Rahim: School of Business and Economics, Universiti Putra Malaysia, 43400 Serdang, Selangor, Malaysia
Junaina Muhammad: School of Business and Economics, Universiti Putra Malaysia, 43400 Serdang, Selangor, Malaysia

Asian Academy of Management Journal of Accounting and Finance (AAMJAF), 2020, vol. 16, issue 1, 127-153

Abstract: This paper presents a fresh perspective on chief executive officer (CEO) turnover, where the impact of CEO turnover on firm value is analysed based on whether the removal is planned or unplanned. A total of 146 announcements for ten years in Malaysia is examined using an event study method. The results indicate that, in general, CEO turnover announcements cause a significant reaction due to changes in the firm’s investment decisions. Specifically, a significant positive impact exists when CEO turnover occurs as planned. In a planned turnover, the negative news of the removal of the CEO is immediately minimised with the positive news of a CEO appointment, indicating the positive impact of establishing a CEO succession plan on firm value. This finding adds new knowledge to the current literature and allows policymakers to examine the establishment of a CEO succession policy.

Keywords: CEO exit; CEO turnover announcement; CEO succession policy; event study; efficient market hypothesis (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:usm:journl:aamjaf01601_127-153

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