CEO succession planning and market reactions to CEO turnover announcements

Abstract

This study investigates how capital market investors assess CEO succession planning in the context of CEO turnover events. Conducting empirical tests using a manually collected sample of 676 CEO turnover cases, we find that CEO succession planning mitigates the negative association between CEO performance and market reactions to CEO turnover announcements. Further analyses reveal that our results are driven by firms with strong corporate governance. Overall, our findings suggest that CEO succession planning disclosure reduces investors’ concerns about firm performance in the event of CEO turnover.