Open AccessStock Market Reaction to CEO Appointment – Preliminary Results
Author(s) -
Katarzyna Byrka-Kita,
Mateusz Czerwiński,
Agnieszka Preś-Perepeczo
Publication year - 2017
Publication title -
journal of management and business administration central europe
Language(s) - English
Resource type - Journals
eISSN - 2450-8829
pISSN - 2450-7814
DOI - 10.7206/jmba.ce.2450-7814.194
Subject(s) - shareholder , capital market , stock exchange , event study , originality , business , stock market , accounting , stock (firearms) , shareholder value , monetary economics , efficient market hypothesis , financial economics , economics , corporate governance , finance , psychology , mechanical engineering , paleontology , context (archaeology) , horse , engineering , biology , social psychology , creativity
\ud\udPurpose: The aim of this paper is to examine shareholders’ reaction to the decision of the supervisory board to appoint a CEO in companies listed on the Warsaw Stock Exchange.\ud\udMethodology: An event study and the mean-adjusted model were applied. The abnormal returns were measured as the CAAR in the entire (-60, + 60) window and selected sub-windows.\ud\udFindings: The obtained values of abnormal returns indicate the shareholder’s negative reaction. Throughout the observation window, they oscillate slightly below zero, and in the window (0, +20) they are negative at -1.566%. Irrespective of the observation window, negative abnormal returns were obtained for over half of the observation (52–57%). Therefore, preliminary results indicate the predominance of the information effect over the real one. The decrease in market value as a result of the event may result from an increase in investors’ uncertainty as to the effects of changes in strategy and skills of the new CEO.\ud\udOriginality: The research is a unique one. To date, no one has carried out research into shareholders’ reaction to a CEO appointment in either the Polish or Central and Eastern European capital markets. They primarily bring the value of cognition of shareholders’ behaviour in the analysed event, which is reected in share prices. They extend the literature on the signalization instruments, i.e. the activities that boards can undertake due to the new information transmitted to the capital market participants and stakeholders. The market reaction to a CEO appointment will without a doubt interest investors; the institutions responsible for supervision (which in the case of Poland is the Financial Oversight Commission) and the legislator in charge of regulations that prevent insider trading while promoting corporate disclosure transparency.\u