Impact of Chief Executive Officer (CEO) succession policy on CEO turnover announcement in Malaysia

• Main Authors: Sivapregasam, Shubasini, Selamat, Aslam Izah, Abdul Rahim, Norhuda, Muhammad, Junaina
• Format: Article
• Language: English
• Published: Penerbit Universiti Sains Malaysia 2020
• Online Access: http://psasir.upm.edu.my/id/eprint/89275/1/Impact%20of%20Chief%20Executive%20Officer%20.pdf; http://psasir.upm.edu.my/id/eprint/89275/; http://web.usm.my/journal/aamjaf/vol16_1_2020.html
• Institution: Universiti Putra Malaysia

This paper presents a fresh perspective on chief executive officer (CEO) turnover, where the impact of CEO turnover on firm value is analysed based on whether the removal is planned or unplanned. A total of 146 announcements for ten years in Malaysia is examined using an event study method. The results indicate that, in general, CEO turnover announcements cause a significant reaction due to changes in the firm’s investment decisions. Specifically, a significant positive impact exists when CEO turnover occurs as planned. In a planned turnover, the negative news of the removal of the CEO is immediately minimised with the positive news of a CEO appointment, indicating the positive impact of establishing a CEO succession plan on firm value. This finding adds new knowledge to the current literature and allows policymakers to examine the establishment of a CEO succession policy.