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The Impact of CEO Turnover on Equity Volatility

Matthew C. Clayton, Jay C. Hartzell and Joshua Rosenberg
The Journal of Business
Vol. 78, No. 5 (September 2005), pp. 1779-1808
DOI: 10.1086/431442
Stable URL:
Page Count: 30
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This study investigates the effect on stock‐price volatility of a significant event in the life of the firm, a change in its CEO. We find significant, long‐lived increases in volatility following CEO turnover after controlling for firm characteristics and marketwide volatility. These increases are larger after forced departures and outside successions following voluntary departures. Stock prices also respond more strongly to earnings announcements following turnovers. These results are consistent with more informative signals of value driving the increased volatility, helping resolve two sources of uncertainty: possible changes in the firm's strategy and doubt about the successor CEO's ability.

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