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Stock price response to new‐ CEO earnings news
Author(s) -
Geertsema Paul G.,
Lont David H.,
Lu Helen
Publication year - 2018
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/acfi.12239
Subject(s) - honeymoon , earnings , stock (firearms) , stock price , monetary economics , earnings quality , business , economics , accounting , accrual , series (stratigraphy) , mechanical engineering , paleontology , political science , law , biology , engineering
New‐ CEO earnings news exhibits asymmetric effects on stock prices. Stock prices rise more on good earnings news announced by firms with new CEO s compared with those with established CEO s. By contrast, stock prices tend to fall by a smaller amount on bad earnings news for new CEO s. Both the new‐ CEO quality effect and the new‐ CEO honeymoon effect are more pronounced for CEO s appointed during challenging situations. The new‐ CEO quality effect is stronger for firms followed by fewer analysts, while the honeymoon effect is stronger for firms followed by more analysts – illustrating the importance of a transparent information environment.