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CEO Turnover Announcements and Information Frictions

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Title:CEO Turnover Announcements and Information Frictions
Authors:Kose John
Xu Tian
Christine Liu
Haofei Zhang
Keywords:CEO turnover
information asymmetry
corporate governance
information disclosure
market reaction
Date Issued:31 Aug 2019
Abstract:This paper analyzes the market reaction to CEO turnover announcements in the presence of information frictions. We find that the market reaction to forced CEO turnover announcements is negatively related to the level of asymmetric information between a firm and its investors. No such relation exists for voluntary turnovers. We also find that in cases where information frictions are high, companies attempt to present forced turnover as voluntary and this behavior leads to a less negative market response. Overall, our results suggest that firms act strategically when disclosing information about CEO turnover to avoid a negative market reaction.
Appears in Collections: 07 Financial: Disclosure

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