THE IMPACT OF SUCCESSOR CHARACTERISTIC ON STOCK RETURNS

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Abstract

To find out effects of top managers’ turnover on stock returns, this study utilizes the market model to analyze the wealth effects of top executive turnover in Taiwanese listed electronic companies. Results in this study show that in the case of insider successor condition, it supports the ritual scapegoating theory for top executives (R&D Managers and CEOs). The results of chairmans are more consistent with vicious cycle hypothesis. On the other hand, the case of outsider successor condition shows that the ritual scapegoating theory is more suitable for CEOs and chairmans. The common sense theory is more valid when the new outsider successors are R&D Managers. The results of this study show that selecting the chairman of board is a critical decision when new successors of chairman of board are insider. The results also show the turnovers of R&D managers have positive stock reactions when new successors are outsiders.

Keywords: Top Executive Turnover, Stock Returns, Market Model, Successor Characteristic

How to cite this paper: Wang, W.-C., Yu, Y.-M., Jiang, S. (2011). The impact of successor characteristic on stock returns. Corporate Ownership & Control, 8(2-5), 516-524. https://doi.org/10.22495/cocv8i2c5p3