Investor Reactions to CEO Succession Announcements: An Event Study of CEO Turnovers at Companies in Europe and the United States

Daniel Cobelas

Student thesis: Master thesis


This thesis analyzes short-term investor reactions to the announcements of Chief Executive Officer successions in the United States and Europe. For this, a unique sample of 241 CEO succession announcements made by firms listed in the Standard & Poor’s 500 and the Euro Stoxx 50 was manually constructed. These announcements cover the period between the years 2010 and 2020. Investor reactions are examined by an application of MacKinlay’s (1997) event study methodology. Abnormal returns are aggregated across several time windows and across all companies. The resulting cumulative average abnormal returns are tested for statistical significance with respect to 16 different hypotheses. These hypotheses are formulated for several individual variables and are based on existing research, which lacks a consensus on most of these variables. Every variable represents a contextual or successor-related characteristic that was collected for each announcement in the sample. These characteristics include the successor’s gender, age, and origin as well as the size of the recruiting company, its business sector, the tenure of the previous CEO, and the company’s stock performance over twelve months prior to the announcement. The overall findings suggest that investors react, on average, positively to the announcement of a CEO succession. Over the course of three days, beginning with the day of the announcement, cumulative average abnormal returns are 0.42% and statistically significant for the 95% confidence interval. Furthermore, the results provide four interesting insights. First, investors prefer male successors over female ones. Second, young successors have a strong positive influence on returns and are perceived very positively by investors. Third, investors appreciate successions after a longer tenure of the previous CEO. Last, while internal successors are observed in more cases, investors appear to be confident in CEOs that are recruited from the outside.

EducationsMSc in Accounting, Strategy and Control, (Graduate Programme) Final Thesis
Publication date2021
Number of pages131
SupervisorsJens Dick-Nielsen