Finance Assignment: Effect of CEO Turnover On Share Price Of Company

Question

Task:

Prepare a well-researched and well-structured finance assignment presenting a dissertation on the topic “effect of CEO turnover(change) on the performance of a company (identified by stocks)”.

Answer

Abstract
Title of the dissertation prepared in this finance assignment: Effect of CEO Turnover on the Share Price of the Company

This study has been conducted to assess the impact of the CEO turnover on the market performance of the company meaning share price movement of the company. It has been found in this study that the impact of CEO turnover is different in different cases. Also, it has been evaluated that the impact of the CEO turnover depends on different factors of that cases like what type of relationship the CEO departing have with the management, tenure of CEO in the organization and many other aspects like these. The data collection method which has been chosen for this study is mixed, and for data analysis, the approach has been deductive. Also, positivism is the philosophy of this study, and the research design type is experimental. Then it has been evaluated whether the investors of the company can get abnormal return due to these CEO turnovers, and it has been found that on average, the investors are likely to get the abnormal return. Then some recommendations have been given how further studies in this matter can be done to get more detailed finding on this topic.

Chapter 1 - Introduction
1.1 Background of the study
CEO or Chief Executive Officer of an organisation is the highest position among the executive or upper level of management of the company. The responsibilities of the CEO includes taking or approving different strategic decisions of the business, monitoring the operation of the firm and the use of the resources of the business in it, and coordinating and communicating with different stakeholders of the business (Dimopoulos and Wagner, 2016,p.12). Therefore, it can be stated that the overall performance of the company in the market falls under the responsibilities of CEOs. In the current business environment, the different external stakeholders of the business look upto the CEO for analyzing how the company is likely to do in the future. So, the market closely monitors the movement and steps taken by the CEOs and any positive movement of the CEO impact the perception of the business positively and any negative movement of the business impacts perception of the business negatively.

It has been stated that as the share price of the company depends largely on the perception of the investors in the market; therefore, these movements of the CEOs directly impacts the share price of the company (Snowball, 2018, p.1). Therefore, in this research study, has been evaluated whether the change of the CEOs of the company which is one of the most significant movements related to the CEO impacts the share price of the firm or not.

1.2 Aim and objectives of the study
The study aim has been to find out whether the change in the CEOs of the company impact the market performance of the firm significantly or not and what is the reason for the CEOs

There are some objectives of this research study which the researcher has been looking to fulfil to achieve the aims of the study are these objectives are given below.

• To analyse the opinions of the different experts about how CEO turnover impact the share price of the company or not.
• To analyse whether the impact which the CEO turnover of the company has on the share price of the company differs from one company to another or not and if yes, then the reasons for those differences.
• To analyse whether the risk or return of the company significantly impact by the CEO turnover or not in the short run.

1.3 The Research Problem of this study
The research problem which has been investigated in this research study is what kind impact is created by the change of the CEO of the company on the share price of the companies and whether the impact which is created by this kind of corporate event is significant or not. In other words, it has been assessed whether this event has been able to generate abnormal return which can be either abnormal loss or abnormal profit for the shareholders of the companies.

1.4 The Hypothesis of this study
There is one hypothesis which has been examined in this study, and that hypothesis is given below.

HO = There is no significant abnormal gain or loss from the share price of the company that the CEO turnover can generate for the investors of the company on average.

Ha = There is significant abnormal gain or loss from the share price of the company that the CEO turnover can generate for the investors of the company on average.

1.5 The research questions of the study
There are also three research questions of this study, and these research questions are given below.

• How the CEOs turnover impacts the share price of the company in the market?
• Whether there is a difference in the way by which the CEOs turnovers impacts the share price of the different and if yes, then the reasons for it?
• Whether the risk and return of the company in the short term get significantly impacted by the CEO turnovers or not?

1.6 Significance of the study
In the current business world, in almost all companies, the CEO is considered to be a representation of the company and the investor directly look at what are the CEO is communicating or thinking to do to understand the future strategic direction or other aspects of the company. When some fraudulent or illegal or unethical activities happen in the company, the CEO becomes the first and foremost person to be blamed in the market, and one of the foremost demand of the stakeholder of the company in those cases is the removal of the CEO from its position (Cooper, 2017,p.534). Also, sometimes a certain CEO become an integral part of the company for the investors of the company and sometimes retirement or removal of that CEO leads to high uncertainties in the mind of the investors about the company even when the fundamentally the company has not suffered any negative consequences in its operation.

On the other hand, sometimes when some highly reputed individual start as the CEO of that organisation, the investors in the market get highly excited and welcomed this change. Therefore, in this study, the process and manner by which the share price of the company gets impacted by the different businesses have been analysed.

Also, it has been evaluated whether the change which can be seen in the share price of the company in term of the return and risk is significant or not. All these analysis and evaluation is important in the current business world as this will help the different stakeholders in the market understand how much important is the position of the CEO and its transition is for the organisation and how it impacts the market performance of the company.

This will lead to better handling of the transition of the CEOs in the market by the management of the company. It will also help the other stakeholders in the market understand how the market is likely to react in the different CEO turnover cases, and they can make their decisions accordingly.

Also, another factor which is increasing the importance of the research topic in the market is the significant increase in these turnovers in the recent years. Therefore, this factor is making it important for the investors to analyse the CEO turnover events in the market so that they can accordingly take their investing decision in the case of the CEO turnover in the company which it has invested on. The data which shows that there has been significant increase in the CEO turnover in the market is given in the form of graph in below.

Figure 1: CEO Turnover in recent years

(Source: Taken from Investors Business Daily, 2019)

1.7 Structure of the dissertation
The structure of the dissertation has been given below.

Table 1: Structure of the dissertation

(Source: Created by the learner)

1.8 Summary
In this chapter, the background, aim, objectives and research questions of this research study have been defined. Then it has been found that this research study has high relevance in the market as this research study will help the different stakeholders in the market understand and predict the change in the share price of the business due to change of the CEO in different cases effectively.

Chapter 2 - Literature Review

2.1 The detailed explanation of the role and responsibilities of the CEO
In the current dynamic business environment, the CEOs of a firm has to play different roles and also have to fulfil responsibilities of CEOs, and in this section, all these roles and responsibilities of the CEOs will be discussed.

First of all, the roles of CEOs will be discussed, and one of the significant roles of the CEO is providing leadership to the management of the company. Under this role of the CEO, he has to provide advice with the board of director of the company efficiently to take the productive decision about different aspects of the firm which will high potential benefit to the business in the long term and help the business achieve its strategic goals in the market.

Also, under this role of the CEO, the organisation expects the CEO to promote the change organisation and its stakeholders in the market related to the organizational mission. Zuraik and Kelly, (2019) stated that it is the role of the CEO to motivate and inspire the employees of the firm to perform well and gives its full effort to achieve the goals of the business.

Reynard, (2016, p.112) stated that the role of the CEO is to be visionary and make sure that the firm changes effectively with the change in dynamics in the market. Under this role, the company expects its CEO to ensure that the management and employees of the firm have sufficient and current knowledge and skills which are most relevant and highly required in the business. Also, the CEO is expected to predict the changes that the business could make or expected to make to remain relevant or increase its significance in the market.

It is also expected that the CEO will become an effective middle point for making communication between the different stakeholders of the firm smoother. For example, when the management of the firm takes the certain decision about the firm, the CEO is expected to communicate with investors and other stakeholders of the business and communicate effectively the reason for the management taking that step.

Fralich and Bitektine (2020, p.101887) tell that role of the CEO is to be the decision-maker of the firm. Under this role, the CEO makes and approves the decision of the strategic direction of the firm in both long term and short-term time. Also, he may have to guide or approve some course of actions which will be taken by the management in the operation of the business.

Glowka et al., (2020, p.14) stated that there are also some responsibilities of the CEO, which will be discussed here, and the foremost responsibility of the CEO is risk management of the business. Under this responsibility, the CEO has to ensure that the key risks of the firm have been identified and proper planning has been done and implemented to mitigate those risks.

García?Sánchez and Martínez?Ferrero, (2019, p.545) stated that responsibility of the CEO is human resource management, and under this role, the CEO is expected to manage the human resource of the firm in such ways that maximum output can be generated from them at lowest minimum cost using them effectively and efficiently.

Huang and Zhang (2020, p.317) stated that the responsibility of the CEO is financial and tax management of the firm. Under this responsibility of CEO, he has to ensure that the company achieve its target in the financial performance of the company and also be able to identify and fulfil the tax obligation of the business effectively.

The fourth responsibility of CEO is the effective management of the public relation of the business. Under this responsibility of the CEO, he has to ensure that the company has a good image in the market and also is have a good relationship with different stakeholders of the business. The fifth responsibility of the CEO is to manage products and programs of the firm. Under this responsibility of the CEO, the CEO has to manage product lines and programs of the business in such a way that it gives maximum benefit to the business at a minimum cost.

2.2 Corporate events impact on the share price movement of the firm
A share is a unit of the ownership of the business which the investors of the company get in the exchange of the fund that they have invested in the company. Schofield, (2017, p.38) stated that the investors should invest in the share of the business according to the intrinsic or fundamental value of the firm on which share the investors are investing upon.

On the other hand, in reality, the share price of the company not only change due to change in some of the fundamental factors of the business but many time some of the corporate events which may not have high relevance in the fundamental value of the firm also impact the share price of the business. These corporate events impact the share price of the company as the perception of the stakeholders of the business changes due to these events of the business. This leads to either panic or excitement about the company in the market, whose result can also be seen in the share price movement of the business.

QIN et al., (2019, p.6) stated that one of such corporate event which creates change in the perception of the stakeholders of the business irrespective of the fact whether they change the fundamental value of the business or not is the CEO turnover. In this following section, the different aspects of the CEO turnover and its impact on the share price of the company.

2.3 The reasons or type of the CEO turnover of different firms
There are mainly two types of CEO turnover, which happens due to different reasons which will be discussed here. The first type of CEO turnover is forced replacement. Under this type of CEO turnover, the CEO has to forced to resign replaced due to many different reasons like mismanagement of resources or any unethical activities taking place in the organisation in which he is was either involved or found to be negligent or careless about the matter or found to be inadequate for the CEO position in the firm or other reasons like these also, under this type of the CEO turnover, the CEO change can be related to different kinds of reasons.

Suk et al. (2020) stated that one such reason could be bad financial performance of the company due to the mismanagement of the economic resources of the company. Another frequent reason under this type of CEO turnover is taking the moral responsibility for different unethical activities happening in the organisation or due to bad working environment of the organisation. The third reason can be the CEO not being able to gain the trust of the different stakeholders of the business leading to him being replaced or he having to resign from the company.

The second type of CEO turnover is the voluntary departure. Under this type of CEO turnover, the CEO voluntary resigned due to different factors in the market. One such reason for which the CEO retired voluntarily is due to better career opportunities in the different organisation which, according to him, will benefit his career more than the current position of CEO. Another reason can be him not being able to meet the expectation of the different stakeholders of the business. Also, sometimes CEO totally retires from not only from the position of him in the organisation as the CEO of the firm but also overall career.

2.3 Some common reasons for the CEO transition
As mentioned in the previous section, the failure of the CEO can be due to different reasons, and there are some common reasons for which the CEO of different companies change and some of these issues or reasons will be discussed here. One of the first common reasons is the merger driven in which two companies in which the CEO of one of the company position eliminated as the CEO of another company take over the role of the CEO of the merged company. Therefore, one of the company’s CEO loses out of his position due to the merger happening surrounding his company.

Jenter and Lewellen, (2019, p.4) stated another reason for CEO change is performance-related in which the CEO either quit the job due to the stress of the position of CEO or has been asked to step down due to the performance of the company not meeting the expectations of the company.

Deng et al. (2019, p.1950001) stated that the reason for the change of the CEO is the regular transition in the organisation. This means the company has good and precise planning to plan how the current CEO of the organisation will be replaced after what time and with whom. This type of transition is the most friendly and stable type of transition of the CEO of the organisation.

The fourth reason for the change in the CEO is an economic condition in the market as it can be seen that when the downturn or recession come or coming in the market, the investors of many companies panic. This leads to the increasing pressure upon the existing CEO to perform better or leave the company by the investors of the company. This leads to the turnover of the CEO.

Huang et al. (2019) stated that the reason is the power struggle between the management of the company and the founder of the company. Under this type of reason, the investor is getting increasingly fed up of the cult-like culture that is created around the founder of the company and then those founders most of the time become the CEO of the company. This lead to the investors feeling that too much power is in the hand of the CEO who is also the founder of the company and this high level of the power of the company in the hand of one person can be harmful to the growth of the business. This leads to the investor trying to force out the CEO from his position or force him altogether from the board of the company. This is lead to the turnover of CEO.

Chyz and Gaertner, (2018, p.116) stated one of the surprising reason is one of the unlikely reason but found to be having high significance which is the tax rate paid by the organisation as it has been found that the company which pays higher tax rate than its competitors, is more likely to have CEO turnover compared to the other companies in the same market. Therefore, the tax rate is another reason for the CEO turnover in the organisation.

Another reason for the higher CEO turnover is the size and composition of the board. This means if the size and composition are made in such a way that the board members of a firm that it has good chances of making the decision about firing the CEO, then that board is more likely to try to change the CEO in case of dissents (Chemmanur and Fedaseyeu, 2018, p.4812). Conversely, if the size and composition of the board are made in such a way that there is significantly less power in the hand of the other board member, then the chances of the CEO turnover is less likely in these organisations.

2.4 The impact of the CEO turnover on the market performance of the company and different factors related to the turnover which decide the impact
The impact of the CEO turnover on the market performance of the company depends on different factors related to turnover. One such factor on which the impact of the CEO turnover highly depends on is the type of relationship on which the exiting CEO has with the management of the company as it has been seen that many time, tenure of CEO ended with the organisation with a bad note. These bad terms between the management and the ex- CEO of the company can lead to tension and sometimes a legal battle between these two parties which impact the stability of the company negatively and this lead to the negative impact on the share price of the company.

One of the factor on which the impact of the CEO turnover depends on is how accepting is the different stakeholders of the business, especially the employees about the newly appointed CEO of the company or how the CEO has fulfilled its corporate social responsibility. This is since sometimes, different stakeholders of the business, especially the employees, do not accept a new person or does not get motivated by the new CEO in the same way as his predecessor. This lukewarm or negative reaction of the stakeholders of the business also reflected in the Share price of the company as this lack of faith in the new leadership creates uncertainties in the mind of the investors also (Hubbard et al., 2017, p.2258)

Conte et al., (2017, p.294) tells one of the factors on which the impact of the CEO turnover depends on is how much dependent is the organisation on the departing CEO. This means if the organisation is highly dependent on the existing CEO, then it makes the transition process of the CEO more difficult than other cases as it becomes more difficult for the new CEO to fill the roles played by the ex CEO.

Another factor is how the market views the existing CEO and new CEO of the company. This means if the personality of the new CEO is unable to meet with the personality of the new CEO of the firm, then the market may not be reacting as well as they should. Conversely, if the personality of the new CEO has higher goodwill than the existing CEO, then the market reacts positively to the turnover of the CEO as the market becomes more optimistic about the company future.

Godos?Díez et al., (2020, p.830) find out factor is planning, which has been made for the transition of the CEO. This means if the planning of the organisation has been good and it has been able to communicate and make different stakeholders of the business ready for the transition of the CEO, then the chances are that the market will react positively to the change.

On the other hand, if the planning in the organisation has been adequate and it has not communicated the transition process to the different stakeholder in the market, then the change of the CEO might surprise or create uncertainties among them which will be reflected in the share price of the company.

Another factor is the tenure of the CEO, who is departing. It has been observed that the organisation whose departing CEO has a long tenure, then it is more likely the next CEO of the company will have a tougher time achieving success of the long tenure. Also, these CEO whose predecessors have longer tenure in the organisation is likely to perform lower than its ex CEO and is also likely to force out of the position (Hou et al., 2017, p.897)

Therefore, in all these cases, the share price of the company will be negatively impacted by the turnover of the CEO. Conversely, the lower tenure of the previous CEO also leads to the higher chances of new CEO success in the organisation as the organisation is less attached to the previous CEO. Therefore, the probability of the new CEO being either forced out or having small tenure or that the performance of the current CEO being lower than its predecessor is low.

All these are some of the factors which decide how the CEO turnover in an organisation will impact the share price of the company.

2.5 The global Phenomenon of higher CEO turnover than before
According to a study made by PWC (2019), the CEO turnover increased in 2018 compared to its previous years. It is being stated that the CEO turnover was at the record high of 17% in 2018. This study of PWC involves 2500 public companies, and it has been shown that in the past 19 years, the median tenure of the CEO has been five years. Also, it analysed that around 19 percent of the CEO in these past years has been able to remain in the position for equal to or more than ten years.

Also, it has been observed that these 19 percent of the CEO group has a median tenure of 14 years which is significantly higher than the median tenure of overall CEO of 5 years. When this study, analyse the data by region, it can be seen that CEO in the North American has a higher probability of achieving successful long tenure at 30 percent where this success rate is much lower for other regions. Like the success rate in Western Europe stands at 19 percent where the success rate in Brazil, India and Russia is very much lower at 7 per cent. One of the region, which is China, the success rate is much lower than 5%.

2.6The Case study of the CEO turnover in real life of some of the well-known companies

2.6.1TrevisKalanick resigned after the internal and external fight in Uber
Cook et al., (2019,p.41) stated that in 2017, Uber was facing federal criminal probe under several types of charges like harassment on women and people of colour staffs, the lawsuit from Google over self-driving technology and illegal use of the software to evade the regulations in the market. All these allegations directly impacted the performance of Uber who within eight years of its foundation has reached nearly $70 billion valuations. One of the people whom the pressure seem to be mounting to ensure accountability due to all these allegations is Travis Kalanick as many members claimed that his leadership is to be blamed for this mismanagement in the organisation. At first, there was an announcement of him taking an indefinite leave from the organisation for his personal growth and overcome the grieve of losing his mother in a boating accident. Although, this step was not enough for the investors or shareholders of the firm and they keep on demanding the resignation of him. Also, to support this cause, many significant investors of the company which also include some of the venture capitalists who invested in the company like Benchmark, First Round Capital and many other venture capitalists like these demanded the resignation of him. Due to this mounting pressure, Travis Kalanick has to resign on 20th June 2017.

Although this decision was taken to the better situation of Uber and its perception in the market, the reaction of the market was negative of this outcome, and many experts including the investors of the company reduced the valuation of the company. The company was not a publicly-traded company at that time.

Therefore, the share price movement of the company in the public market cannot be examined, but this reduction of the valuation of the company by its own investors shows the negative reaction of the market of this resignation. Although, the experts were also likely to point out that this resignation was not the reason for the reduction in the valuation of the share price of the company, but the first effect of all the scandals or allegations which were surfacing related to the company.

2.5.2Jack Dorsey fired from the Twitter board for odd management style
The co-founder of Twitter named Jack Dorsey, who also claimed as the position of CEO of the company was fired from his position due to his odd management style. Duncombe, (201, p.414) stated that it had been alleged that he used a large portion of his working hour in organisation indulging his personal hobbies like painting or sewing in the organisation. Also, he alleged to encourage a culture of heavy alcohol consumption and excessive partying.

All these lead to him having clashes with the other co-founder of the organization named Evan Williams, who also founded the organisation’s launch. All these lead to him being fired in 2008 as CEO of the company. Although, it should be noted that he was comeback as the executive chairman of Twitter in 2010 after running a whispered campaign against Evan William. In 2015, he was reinstated as the interim CEO, and the position was made permanent in the later period.

It can be stated that the reaction of the market after inclusion of Jack Dorsey was highly disappointing as one of the competitors named Facebook valuation has doubled from 2015, but the share price of Twitter has increased by only around 10% in the same period. This shows that investors in the market are not totally confident about the leadership of him or his leadership style has not been able to capture the market like its competitor has been able to do. One of the reasons for such less enthusiasm about Twitter in the stock market can be found in the advertising revenue that the company generates per active daily user, which is three times lower than Facebook. Also, the operating profit margin of the company stands at 11%, whereas the operating profit margin of Facebook stands at 34%.

2.6.3 Rivalry between John Sculley and Steve Jobs in Apple and comeback of Steve Job in the company
Heracleous and Papachroni, (2016) stated that one of successful comeback story which is being discussed by most in the corporate world is Steve Jobs. Steve Jobs co-founded Apple in 1976 but gained a bad image of being rude and difficult to work with. Also, the investors of the company were not happy with Steve Jobs monitored performance as two of his projects named Apple Lisa and Macintosh Computers had generated subpar sales.

In 1985, John Sculley tried to reassign Steve Jobs to smaller roles in the organisation and when he tried to complain about to the board of the company, but all-sided with John Sculley and fired him. After this outser, Steve Jobs started his own startup company called NeXT, whereas the dismal financial performance of Apple continued. This leads to Apple acquiring NeXT and reappointing Steve Jobs as CEO in 1997. After Steve Jobs left Apple, the share price of the company was declining at a high rate due to lack of belief in the leadership of the company by the investors in the markets and also due to bad financial performance of the company, and when Steve Jobs comes back, the share price of the company quickly reached $99 within two years after his return.

2.6.4Danny Zappin sued the company over his ouster from his cofounded Marker Studios
Redman, (2020) stated that Danny Zappin cofounded Marker Studios that network provider is behind several youtube channels, but in 2013, Danny Zappin was ousted from the organisation. This was not a friendly transition and led to him suing the company over his ouster. Then he also founded his new start-up company named Zealot which raised around $25million in the early series of fundraising.

Then Marker Studios sold a part of its shareholding to The Walt Disney company in 2014 and then Danny Zappin sued the company for the second time in regarding the blocking of his vote of the decision of the acquisition of the company by The Walt Disney. After which the company agreed to purchase the share of him worth up to $950million.Although no significant impact of this CEO turnover was recorded in the organisation. Although the share price movement of this company cannot be observed as this company is a private company.

2.6.5Away’s Steph Korey departure from the company following a bad working culture in the company
Bloomberg.com, (2020) stated that StephKorey is the CEO and co-founding father of Away, a self-defined journey and lifestyle logo that sells modern bags. Korey is the present-day CEO to step down, hire a brand-new CEO, and take over the management. The background to this alteration turned into instructions in a hit by means of Verge that went viral. The article paints an image of Korea as a cruel micromanager and a ruthless boss who belittles employees and needs an excessive amount of them. It might not be famous because of the community atrocities that Korea has been accused of. Verge and different online magazines no longer appear to address the realities of corporate existence directly for each executive and employee.

Steph Korey had stressed on the components of a people-oriented cultural approach, and the business model was based on the component of stakeholder satisfaction. This provided an incentive to Away to launch its products across a wide social media platform and different modes of online marketing channels.

It was also observed later that the components of innovation and strategic innovation to ensure corrective business operations and activities. It is important to account for several factors which involve correct business operations and activities that can ensure long term operational efficiencies. The toxic work environment caused StephKorey to retire, and it was also observed that the toxic work environment led to the creation of a suitable degree of work pressure for the CEO who was unable to adjust to the same. It is a private company. Therefore, the impact on the share price of the company cannot be evaluated in this case.

2.6.6 Blue Apron’s Brand Dickerson’s departure from the company to pursue better opportunities
Financial Times.com, (2020) stated that Blue Apron is one of the largest meal-kit firms in the UK. However, the repeated losses and failure of business operations led to the fact that Brad Dickerson has stepped down from the post of CEO to pursue better opportunities in the future. It has also been observed that the organization’s CEO has had immense experience in the field of marketing and other essential components. It is also important to take into account various factors, such as exploiting new opportunities to ensure corrective business operations and activities.

Blue Apron's first 30% of customers, primarily based on net profits earned in the previous group, accounted for extra than 80% of this group's internet profits inside the year following the acquisition and achieved average returns on consumer acquisition prices in less than six months. This offers an opportunity to deepen dedication to this "satisfactory customer" section and unlock consumer fee with comparable attributes.

Blue Apron intends to attention its innovation and advertising efforts to pleasantly serve its clients' desires and appeal to greater of them via the use of a deep understanding of their conduct, goals and alternatives to tailor customer stories through product improvement, emblem bulletins and unique services to segments. Brad Dickerson had always been a hard-working employee of the organization and the enterprise scaled to great heights in his presence.

However, owing to the losses suffered by the organization later, it faced a decline in operations, which resulted in a low degree of business growth. When Dickerson felt that he was not able to reach great heights in spite of his efforts, he ultimately decided to quit the company and began looking for better job opportunities.

In addition, Blue Apron will keep forging tremendous partnerships with manufacturers and innovating merchandise to beautify its middle offering in phrases of the way of life possibilities on this section. Blue Apron will reallocate reasonable marketing sources and fees to help the success of recent and destiny strategic partnerships even as searching to do away with its investment in unprofitable customers.

However, the decline in the operating activities over the time period has led to the establishment of the fact which can help to increase business activities and operations over the time period. Both small- and large-scale organizations need to emphasize upon aspects such as optimum utilization of organizational resources. This is another private company so the share price movement of this company cannot be evaluated but

2.6.7Expedia’s Mark Okerstorm abrupt departure following a disagreement with the management of the company
Business Insider (2019) stated that Mark Ockerstrom's journey as CEO of the Expedia Group ended due to various conflicts of interests. On Wednesday, Barry Dealer, chairman of the Expedia Group and majority proprietor of the conglomerate, stated in a declaration that reorganizing the business enterprise's team and repositioning a number of its manufacturers had distracted agency executives from quick-term growth goals.

Skift drastically covers the reign of Okerstrom. A recap of the important things from his tenure, including what the CEO set for himself and why reorganization might have stalled, has revealed various interesting factors. The story, that's based in large part on a report through Dennis Schaal, CEO of Skift can assist explain the factors riding present-day information. 46-oldOckerstrom won the process for two important motives. During his 1/2 year as CFO, he validated his know-how in overseeing consistent sales increase.

Since changing its name to Vrbo, Okerstrom has also controlled numerous famous acquisitions along with the rental organization HomeAway. It is consequently tragic and ironic that the board of administrators of the Expedia Group, led with the aid of its major investor sellers, overthrew Okerstrom because of issues of approximately consistent profits boom. For instance, in the second zone of this year, the Okerstrom crew set pointers for buyers regarding the earnings the organization would generate.

Management then revised its forecast downward and, in line with Olson von Piper, created trust troubles with buyers. Okerstrom desires to trade the e-book to play in the Expedia organization. One of Okerstrom's key decisions became to comply with the call of the HomeAway division from HomeAway to Vrbo. HomeAway's flow to Vrbo is the way Google should crawl new records. The effect on referral and reservation boom turned into extra influence than the Expedia Group projected.

Finally, the disagreement of the board associated with a particular strategy led to the resignation of Mark Okerstrom. There has been a significant drop in the share price of the company after he departed from the company.

2.6.8HBO’s Richard Plepler departure from the company
Shortly after the deal, WarnerMedia CEO John Stankey held an assembly at City Hall wherein he stated HBO had to increase its patron base and the time subscribers spent looking at HBO content. One of the first-class TV series is coming to a halt. Richard Plepler left HBO after 27 years with the cable giant and three decades in the past when the Home Box Office has become the main generator of prestigious television content and a global emblem with contemporaries.

Plepler notifies employees of his decision on Thursday. News of Plepler's departure comes 9 months after AT&T authorized and completed an $ 85 billion acquisition of discerning HBO War Timener to create WarnerMedia. This was followed by the Hollywood Reporter who introduced that Bob Greenblatt was in talks with the business enterprise for a major new role, one that might place the previous chairman of NBC Entertainment in a leadership role on the pinnacle of the television's tremendous portfolio.

Many experts cited HBO's shrinking autonomy in WarnerMedia's expanded portfolio as a key motivator, announcing Plepler had a lucrative conversation with WarnerMedia CEO John Stankey about stepping out of the tent to enrol in the new top programmers at parent enterprise Discover. Plepler joined HBO in 1992 and subsequently rose to co-chair (a position he held from 2007 to 2012) and chairman and CEO in 2013.

In the latest years, HBO's enterprise dominance had been pushed by Netflix's revival in each streamer and prestige subscriber game. Plepler and President of Entertainment Casey Blaise recommended that HBO improve its content, relatively modestly compared to Netflix, but all that modified with the creation of WarnerMedia. The community is now trying to increase its preliminary supply to stay aggressive with Netflix, Amazon and 15 other emerging streaming competitions.

2.6.9 United Airline’s Highly successful CEO Oscar Munoz step down from his position
One of the successful CEO in the US market in term of the share price growth of the company in his tenure period is Oscar Munoz of United Airlines. In his tenure period, the share price of the company has raised more than 50%. He decided to step down from his position as CEO of the company in 2019 but decided to stay as the Executive Chairman in the board of director of the company. This CEO turnover event has friendly one in which Oscar Munoz has himself have decided that it is time for the change in the CEO position of the company and he has approved the person who will replace him as the CEO of the company. That person is Scott Kirby.

Benoit, (2018, p.12) Munoz has faced some of the series issues of public relation from the start of his tenure in September 2015 as the company has been accused of mistreatment of the passengers in the plane. Especially one incident got international media attention in which one bloodied passenger dragged off the plane in 2017.

Yang et al., (2018, p.3) stated that the situation got so bad after that scandal that Oscar Munoz has to appear on television and faced lawsuit due to the incident. Although, even after facing such a difficult time in his tenure time as the CEO of the company, he called being the CEO of the United Airlines the honour of his career.

2.6.10 Rite Aid Corporation’s CEO named John Standley departure after the continuously bad financial performance of the company
Forbes, (2019) stated that Rite Aid is one of the drug store chains in the American market whose CEO for the last nine year called John Standley has decided to quit in August 2019. This CEO turnover can be contributed to the fact that the company is struggling in the market against strong competitors like CVS and Walgreen.

This struggle can also be reflected in the financial performance of the company as the company has lost sales worth of $5 billion from 2015 to 2019 and also the value of the share price of the company has declined significantly in the market in this period. All these have lead to the company closing many of its stores. All these lead to the managerial changes in the company, which also includes the change of the CEO of the company who is John Standley.

2.6.11Bizarre departure of Patrick Byrne as the CEO of the Overstock
Pearson, (2016, p.271) stated that the departure of Patrick Byrne as the CEO of the company named Overstock after a bizarre series of events after being CEO of the company for 20 years. He resigned from this position after releasing an article in media called “Comment on deep state” in which he claimed that he has helped FBI carry out political espionage and also stated in the letter that he is quitting from his position as CEO as he is too much controversial figure to be in a position of CEO. Therefore, he stated that for the welfare of the company, he is quitting from his position as CEO of the company so that the performance of the company is not affected by his controversies. The impact of this departure on the share price of the company was negative as the share price of the company slides 5% after he departs from September 2019 to November 2019.

2.6.12 Positive reaction of the market on the turnover of the CEO of McDonald’s
Boyar and Davis-Friday, (2019, p.400) stated that one of the CEO turnovers which have seen a positive reaction from the market is the replacement of the CEO of McDonald’s named Don Thompson, and he was replaced by the chief brand officer of the company named Steve Easterbrook. MacDonald’s share price was $88.78 on the day of the replacement announcement, which is 28th January 2015 but quickly climbed to $93.27 in the following day. This trend of upward movement of the share price continued till 19th March 2015 in which the share price of the company reached $100.68. It climbed down to $95.59 by Thursdays which can be mainly attributed to the company sales going down by 2%.

2.6.13 Change of CEO of Mattel having no significant impact on the share price of the company
Gilliard et al.,(2019, p215) stated that in 2015, Mattel decided to change its CEO who in that time was Bryan Stockton after the company lost its position as the leading toymaker company in the global market. His replacement was announced as Christopher Sinclair who was the company’s CEO at that time.

This announcement failed to get a positive reaction for the company as in the announcement date, and the company share was $26.64 in the date of the announcement which was 26th January and changed to around $26.59 by April. Although, in between these company climbed to $30.22 but quickly come down to around $26 per share.

2.6.14 American Apparel’s CEO Dov Charney fired after his unethical behaviour in the company
It has been stated that in bizarre events in American Apparel, the CEO of the company named DovCharney’s vital got viral in which he was dancing in front of female employees naked. There have been continuous accusations in series of sexual harassment cases in the organisation against him which he has been able to dodge till now, but that viral youtube video of him was the last straw. He was fired after that video circulation on December 2014 (Argetsinger, 2018, p.33). The company was already struggling in that time, and after this replacement, the stock price of the company reached the rock bottom of 58 cents.

Although, the company recovered some of its position in the market when Paula Schneider, who is a well-known name in the fashion field replaced him, and the share price of the company reached $1.14, but then again the company in few days, the company’s share reached 55 cents.

2.6.15 Smooth transition of the leadership in Oracle leading to the company being able to mitigate the bad effect of the CEO turnover
In the case of the Oracle, when the successful CEO of the company named Larry Ellison retired in September 2014 from this position of the CEO in the company. It was expected that the market would react negatively to this change as he was successful in his position and generated good result for the company, and this is exactly what happened in the beginning. On the day when he announced his retirement, the share price of the company was $41.55 before the announcement, but it climbs down to $37.56.

Although, the company bounce back in the market pretty quickly as the share price of the company reached 12 months high on 24th December at $46.23. The reason for this bounce-back of the company can be attributed to the fact that Ellison does not totally remove itself from the company and still executive chairman and chief technology officer of the company. Also, the individuals who replace him are Mark Hurd and Safra Catz as the CO- CEO of the company.

2.6.16A significant better performance of the share of Target after the company ditches him as CEO of the company
Forbes, (2014) stated that After five months of scandal in Target in which it was found that the customer’s credit card and debit card in a data breach in the company, the company decided to let go of its then CEO Gregg Steinhafel. The market reaction was negative when the company first announced that their then CEO named Gregg Steinhafel stepping down was made public, the share price of the firm was $61.02 in 5th May 2014 but quickly declined to $55.40 by 29th May 2014.

Although, from that point company’s share price started to bounce back and when the company announced new CEO of the company as Brian Cornell in July 2014 who started to work from August 2014. This announcement of the new CEO leads to the high-speed increase in the share price of the company as the company share price increased to $83.57 within three months.

2.6.17Dramatic change in the share price of Hewlett-Packard due to change in CEO of the company
Carly Fiorina proved to be disastrous CEO of the Hewlett Packard when she joined in 1999. It is being stated that the company was already suffering from bad financial performance due to the economic downturn, which was going on in the market. It also being stated that the HP bad performance did start in 1990 when its founders become less and less involved in the organisation (Larcker and Tayan (2016, p.21).

Although, one of the accusations which are placed against her is that she was not Visionary and did not know how to handle a company like HP. During her tenure, the share price of the company falls from $27.91 to $19.51, and the following year after her departure, the company’s share price dropped further to $18.86. When Mark Hurd joined the company as the new CEO of the company on 29th March 2005, after one bad initial year of his tenure, the share price of the company began to recover with share price reaching $23.41 by 8th February 2008.

2.7The steps that can be taken in the case of the sudden CEO turnover of the business to minimize the negative impact on the share price of the company
The organisation can take some steps in the case of the sudden CEO turnover of the business that can lower the negative impact surrounding the CEO in the market or share price of the company. Also, it has been found that it cost the organisation a significant amount to loss a CEO suddenly with much planning as this sudden change in the uppermost leadership level of the business lead to the loss of direction among the management and the employees of the company. This impact the financial performance of the company negatively, including the market performance of the company.

MIT Sloan Management Review, (2020) stated for these reasons, and it has been found out that the companies should ensure that some of the steps are taken by the company to reduce the effect of the sudden turnover of the CEO. One of the steps is making or creating policies or procedure in place which will ensure that there is a proper succession plan in place so that there is no risk of knowing how to change the CEO of the organisation. Also, another step which can be taken by the organisation is to meet with the potential candidate for being the successor of the existing CEO, and this will help the organisation have a good idea of who is suitable for the CEO position of the organisation and who will not. Therefore, in the case, there is a hasty turnover of the CEO of the company, then the firm will have a good idea who they should approach to replace him.

Also, another step that should be taken is to enter into a nondisclosure agreement with the candidates who they are interviewing to replace the existing CEO of the company. This step is important as it can be seen that CEO ego clash with the management leads to a bad environment in the organisation. This can happen as interviewing CEO can spread rumours in the market, which can hurt the ego of the CEO, and this can create a bad relationship of the CEO with its organisation. Therefore, by entering into a nondisclosure agreement with the interviewing individuals, the company can safeguard itself from such a situation.

So, these are the few steps which the business can take that will help the organisation in the case of the sudden departure of the CEO.

2.8 Abnormal Return of stock of the businesses
Abnormal return is the difference between the actual and expected return of the investment in the market. This abnormal return can be both positive and negative also. When the abnormal return is in negative meaning the actual return is lower than the expected return in the market, then that return is called abnormal loss as the investors' loss out generating a part of the expected return that it is expected to get (Lestari and Nuryatno, 2018, p.50)

Conversely, when the actual return is higher than the expected return, then that return is called abnormal gain as the investor can get a higher return than it has been expected to get in the normal situation. Most of the investors in the market keep looking for an abnormal gain in the market, but to get abnormal gain by which the investors can get high return in a very short time, but due to the risk in the market, sometimes, the investors also had to experience abnormal loss.

These abnormal returns are generated in the market due to the reaction of the market regarding different events in the market. These events can be both company-specific or can be related to the market in which the company operates. When the reaction of the market is positive regarding an event, then there is a generation of the abnormal gain in the market.

Conversely, when the reaction of the market is negative regarding an event, then there is a generation of abnormal loss in the market. One of the events which lead to the abnormal return creation in the market is CEO turnover. When the change is sudden, the abnormal rate tends to be higher than the change of CEO, which has been expected by the market.

2.9 Disciplinary factor influence on the CEO turnover of the companies
It has been seen that the CEO turnover of the companies for a large percentage happened due to the different disciplinary factors regarding the CEO behaviour. One of the study by Harvard has shown that the around 34.3% of the CEO turnover happens due to different disciplinary factors. The graph regarding it has been given below.

Figure 2: CEO Turnover due to disciplinary and non disciplinary factors

(Source: Taken from Harvard.edu, 2011)

2.10 Summary
It has been found in this chapter that the role of the CEO in an organisation is highly significant in the organisation. Then it has been found out that corporate events like CEO turnover have a significant impact on the share price of the company. Then it had been identified that CEO turnover could be divided into two types which are the voluntary departure of the CEO and forced departure of the CEO.

Then different factors which contribute to the departure of the CEO has been identified in this chapter, and some of these reasons are performance-related, clash of CEO and investors, the performance of the company and many other factors like these. It has also been identified that the different factors in the market decide the impact of the CEO turnover on the share price movement of the company like tenure of the company, personality of the company, the transition type of the CEO and many other factors like these.

After which, it can be seen in different case studies have been used to understand how the market has reacted to different CEO turnover in different situations. Then some steps has been identified by taking which the company can reduce the negative impact of the sudden departure of the CEO in the company. Then the abnormal return on the stock of the business has been discussed, and it has been found that due to CEO turnover, there can be a significant amount of abnormal gain generation, but the investor can also suffer from the abnormal loss due to these events.

Chapter 3 –Research Methodology

3.1 Research Approach
The research approach is the plan and procedure that include the board assumptions which has been made regarding the data collection, data analysis and interpretation (Tuffour, 2017, p.52). For the data collection, the research approach which has been used is a mixed research approach (Schoonenboom and Johnson, 2017, p.112). This means that both qualitative and quantitative data has been collected in this research. Qualitative data include those data which cannot be measured but can be approximated and characterized (Silverman, 2019, p.3). Quantitative data are those data which can be measured and quantified. Therefore, the data collection method approach of this research is a mixed research approach (Goertzen, 2017, p.14).

The research approach which has been used for this research analysis part is the deductive approach. The deductive approach includes the using of the quantitative data and the aim of the research is testing the existing theories (Woiceshyn and Daellenbach, 2018, p.1).

This research approach has been identified as the deductive research approach for data analysis as this research looks to examine whether there is a significant relationship between the change in the share price of the company and CEO turnover of the organisation as claimed by existing theories in the market by different experts.

Also, this research plans to use quantitative data of the share price of the companies before and after the change of the CEO to examine the existing theories about the CEO turnover effect on the share price of the company. However, the findings from this quantitative data analysis have been linked with the qualitative data which has been collected to enhance the finding of the data.

3.2 Research Paradigm
The research paradigm is the beliefs which the research follows to understand the problem and addressed in this research topic (Edson et al., eds, 2016, p.4). The research paradigm of this research study is positivism research paradigm. The positivism paradigm includes having a belief that the problem can be understood and addressed objectively (Park et al., 2020, p.692). The positivism research paradigm has been identified as the belief of this study as the research has look into the impact of the CEO turnover on the share price of the company in objective ways by using regression analysis to test whether there is a significant relationship between these two variables or not.

3.3 Research design
The research design is the overall strategies which have been used to link the different aspects of the study in logical and scientific ways which will also ensure that the research problem is being addressed effectively (Rahi, 2017,p.3). The research design of this research is identified as an experimental research design. The experimental research design analyses the relationship between cause and effect variable of phenomena. In other words, this type of research methodology analyses the impact or effect of the independent variable on the dependent variable (Korsnes et al., 2018, p.229).

This type of research design has been identified as the research design of this study as the aim of this research is to analyse the impact of the CEO turnover which has been assumed to be an independent variable in this research on the share price of the company which is the dependent variable of this study. Therefore, this is the reason for considering the research design of this study to be categorised as an experimental research design.

3.4 Sample Size and other details
The sample size of the quantitative data is of the majority of companies from the US market, and some of the CEO of the company is be from Europe excluding the financial sector. In this sample, the data of the different sectors has been taken to make the research more diversified and ensure that the research findings are not limited to one sector or industry of the US or Europe market.

The quantitative data of this research has included the share price of the company five days before and five days after the 62 CEO turnover events of different companies. The sample size of the qualitative data of this research is of corporate events of CEO turnover of different companies in the market consisting of different secondary authentic sources, and these sources include the books, research article or journal or any other authentic sources like these. These qualitative data included in the literature review part of this research, but significant finding from those data used in the literature review has been be integrated into the data finding part of the research.

3.5 Sampling technique
The sampling technique which has been used in the research for the quantitative data has been judgemental. The judgemental sampling technique has been used as only the relevant listed companies’s events in the US and European market has been used and its relevance has been judged by the researcher (Taherdoost, 2016, p.5). Also, one of the criteria which has been set in this sample selection is that the company should be listed and should be non-financial company.

3.6Time horizon
The time horizon of the data which has been collected, which be of five days before the event of CEO turnover of the selected organisations having happened and also five days after the CEO turnover of the companies. Also, the CEO turnover which has been selected for this analysis have to be of such events which have happened from 2010 so that there is high relevance in the finding which has been accumulated from the data analysis of the share price after and before the event of CEO turnover.

Also, the secondary data which has been collected for the literature review will be of the last five years. This again has ensured that the opinion which is taken of different experts about the research topic is updated.

3.7 Data collection strategies
The first data collection strategy is of identifying the different aspects on which the data is required to be collected for the literature review. Then after which, the data of each aspect have been collected to ensure that there is enough data to get the finding of different aspects of the research which has been identified from authentic sources.

Then the second data collection strategy is to collect the data of the share price surrounding the CEO turnover which has created a significant impact in the market so that the finding which is collected from the data analysis is valid and have high relevance. Also, it has ensured that share price data which is collected is of different sectors or industries.

3.8 Data analysis method
For data analysis of the information added in the literature review part of the study, the researcher has tried to objectively assess and interpret the point of view of the different experts and authors whose written sources has been used in the research, so that the different point of views are fairly and accurately presented in the study.

Then for the data analysis of the quantitative data of this study, first of all, the average of the return before the CEO turnover for the given five days has been calculated, and then the expected return of the company has been calculated using the beta which using the data of the five days before the announcement. It has been assessed whether there is any abnormal return observed due to these CEO turnovers of the business.

For this observation, the actual return and expected return has been compared of the five days after the event. In this comparison, it has been evaluated whether there is any significant level of abnormal returns opportunities which have been detected for these turnovers of CEO of different companies’ events which the investors in the market could generate gain abnormal profit or loss from the market. For the analysis, the two-sample t testing and single-factor ANOVA in excel has been used to assess if there is any significant difference in the expected return and actual return of the business.

Also, for the calculation of the expected return of the stock of the companies, the CAPM method has been used in which beta have been extracted from any reliable secondary source. Also, the risk-free rate that the rate of return that the business can get from the market without any risk has been assumed to be a three month Treasury bill in the US market. The market rate of return is assumed to be the average rate of return for the five days before the announcement of the CEO turnover.

3.9 Limitation of the research
There are also some limitations of this research which has been discussed in this section. The first limitation of this research is that only 62 CEO turnover events of different companies have been taken for the finding of the significance of the CEO turnover on the share price of the company. This can create significant bias in the finding as 62 CEO turnover events of different listed companies for a very small part of the companies which has experience CEO turnover in the last ten years.

Therefore, the sample size may not properly represent the overall population characteristics of the CEO turnover in the US or Europe market. Also, the scope of this study is limited to US and Europe market only, and there can create a location or cultural bias in the finding of the study as the focus of the study is only on the listed companies in the US and Europe market which mainly represent US and Europe working culture.

The third factor of this study is that only CEO turnover and the share price are the two variables being considered for the study where there may be other factors which may impact the share price of the listed companies related to the CEO turnover like tenure or age of the CEO and many other factors like these. The fourth limitation is that the beta of the listed companies which has been used in the calculation of the companies’ expected rate of return has been extracted from the secondary sources so that data can be biased. The fifth limitation is that this study’s data analysis has been focused on only the impact of the CEO turnover in the very short period, but in many cases, the CEO turnover impacts can also be related to the change in the share price movement in the long term.

3.10 Ethical Consideration
There are some ethical considerations which have been considered in the time of completion of the research study. The first ethical consideration is ensuring that the information which is used in this study is from authentic sources so that the finding which is taken using these data are valid. Otherwise, there has no relevance of the research.

3.11 Summary
In this chapter, the different aspects of the research methodology which has been used to get the data of this research and then evaluate the data using the belief, assumption and methods which has been discussed in this chapter.

The research approach for data collection of this research is mixed, and also the research approach in the data analysis part of this research is deductive. Then the research paradigm of this research has been identified as positivism, and the research design has been identified as the experimental research design.

Then the sampling technique which has been used to collect the data of this research is the stratified sampling technique. Then the time horizon of the data which has been collected in this analysis is starting from 2010. Also, at last, one ethical consideration which has been taken into account in time of data collection is that all data are collected from authentic secondary sources. Therefore, in overall, different aspects of the data collection method or processes have been discussed in t his chapter.

Chapter 4 – Data Analysis and findings

4.1 Data analysis
For this experiment in this study, there has been one hypothesis will be used which is whether any abnormal gain or loss that the investors are likely to get due to the CEO turnover event of different companies in the US and European market.

Therefore, the hypothesis which is created in this study is given below.

HO = There is no significant abnormal gain or loss from the share price of the company that the CEO turnover can generate for the investors of the company on average.

Ha = There is significant abnormal gain or loss from the share price of the company that the CEO turnover can generate for the investors of the company on average.

For the calculation of the expected rate of return, the following formula has been used, which is given below.

Expected return = Rf + ?( Rm –Rf)

In the above formula, the Rf is the risk-free rate which is the 3-month treasury bill yield rate

Rm is the average return of the stock five days before the event.

The market premium, which is ( Rm –Rf), is the difference between the calculated average return of stock minus risk-free rate applicable to the period in which the event has happened.

? is the beta of the company which have been extracted from the secondary sources available.

The abnormal return is the difference between the actual and expected return of the stocks in the market.

In below, the average expected return, average actual return and abnormal return of the companies after the announcement of the CEO turnover is given.

Table 2: Calculated Expected Return and Actual Return of the companies after CEO turnover

(Source: Calculated by the learner)

As discussed above the expected rate of return has been calculated using the CAPM method, and the actual return has been calculated by finding the percentage of the difference between the share price of the current days and previous days. Then the average of them has been calculated, and from there, the abnormal return has been calculated by dividing the expected return from actual return.

It has been examined whether there is any significant difference between the expected return and actual return as if there is a significant difference, and then it would mean that there are significant abnormal return chances or opportunities in these CEO turnovers events. Conversely, if there is not a significant difference between the actual and expected rate of return, then that would mean that there are no significant chances of abnormal return in these events.

Then two tests which has been used to examine the significance level in the actual and expected return on average is single-factor ANOVA testing and t-test: two samplings assuming that there is unequal variance.

The significance level of these two tests is 0.05 or 5%.

The decision which has been made is that if the p-value in t-test: two samples assuming that there is unequal variance is lower than or equal to the significance level, the null hypothesis should be rejected, and it has to be assumed that there is a significant difference between the actual and expected return.

The decision which has been made is that if the p-value in single factor ANOVA testing is lower than or equal to the significance level, the null hypothesis should be rejected and it has to be assumed that there is a significant difference between the actual and expected return.

Table 3: The extracted result of Single Anova testing

(Source: Taken from and calculated in excel)

Conclusion from the single annova testing result:
It can be seen from single ANOVA testing result that the p-value between the two groups is more than 0.05 which means that the null hypothesis is rejected and alternative hypothesis accepted which means that there is a no significant difference between the average actual and average expected return. This concludes that according to this test result that there is no significant abnormal return in these events in average.

Table 4: The extracted result of t-Test: Two-Sample Assuming Unequal Variances

(Source: Taken from excel)

Conclusion from the t- test result:
It can be seen that from t-Test: Two-Sample Assuming Unequal Variances result that the P-value for the two-tailed tests is higher than the significance level. Therefore, it is concluded that there is a no significant difference between the average expected return and average actual return, so it concludes that the abnormal return opportunities in these CEO turnover events is not significant.

Figure 3: The return which have been expected normally of different companies after 62 CEO turnover events of those companies

(Source: Created by the learner with the help of the data collected and analysed in excel)

Figure 4: The actual return of different companies after 62 CEO turnover events of those companies

(Source: Created by the learner with the help of the data collected and analysed in excel)

Figure 5: Comparison of the average expected return and actual return of different companies after 62 CEO turnover events of those companies

(Source: Created by the learner)

Figure 6: Average Abnormal return of the companies after 62 CEO turnover events of those companies

(Source: Created by the learner)

In this case, it can be seen that although, in some of the cases, the events has been able to generate high level of abnormal return in general, it can be seen that there is has not been significant abnormal return from these events for the companies.

4.2 Data findings
The finding of the data analysis shows that there is a no significant difference between the average expected and average actual return of 62 CEO turnover events of the different listed companies in the US and European market whose data has been used here. As there is a significant no difference between the actual and expected return of the companies in immediate days after the announcement of the CEO turnover of these companies, this also means that there are no significant chances of abnormal return of these companies’ stock immediate days after this announcement.

These finding directly contradict with the information which has been summarised in the literature review of the study which stated that there is significant relationship between the share price of the company and the CEO turnover of the company. However, it should also be noted that the literature review stated that there are different factors in the market which influence the impact of the CEO turnover in the market. Therefore, this information in the literature review chapter when linked to the result in the data analysis part indicate that there are many CEO events in the markets which has been influenced by some factors in these events which lead to high abnormal return in some cases but in overall the CEO turnover events itself fails to generate abnormal return in the shares of the company for its shareholders.

This finding can be also be verified by the figure which compares the expected return and actual return of the shares of the companies which shows that although, in some cases, there are significant difference in the actual and expected return of the companies after CEO turnover event. However, in many cases which has been analysed above shows that there has not been significant difference between the expected return and actual return after these corporate events of CEO turnovers of these listed companies.

Therefore, in response to the first research question which asked how the CEO turnovers impacts the share price of the company, it can be stated that more than the CEO turnover itself, the factors surrounding the CEO turnover seem to be impacting the share price of the company. If these factors fail to have significant influence over this event and its perception in the market, then the market may not react significantly different than how they react normally. So, it can be assumed that more than the CEO turnover event, the different surrounding factor of the event influence level of the abnormal return which will be generated by the event. Therefore, the investor should not always takes investing decision of it by looking out for these events, but should also properly analyse the surrounding environment in which the CEO turnover of the companies in happening and take its investing decision accordingly.

For example, if surrounding environment of the CEO turnover is seem to be highly negative, them the perception of the market surrounding that CEO turnover will be also be negative. This is likely to lead to abnormal loss created from that event for the investors of the company.

On the other hand, if the surrounding environment of the CEO turnover is highly positive like new CEO being high reputed and is perceived to be having high potential to change the fate of the company, then it is likely that such CEO turnover event will create abnormal profit or gain for the investors of the company.

There is another possibility which seem to be happening in the majority of the cases in the above events of CEO turnover which has been analysed. This possibility is that is no factor surrounding the CEO turnover having significant impact on the event leading to no significant impact of the CEO turnover in the market. Therefore, in that case, there will be no abnormal return created by this event occurrence.

Therefore, this finding can also be interpreted as the fact that CEO turnover as event itself cannot create abnormal return or significant impact on the share price of the company unless there is some significant influencing factor driving that event or influencing that event.

The second question that is whether there is difference in the way the CEO turnover events impacts the share price of the company and the reason for it can be answered in that way that although, not the event itself but different surrounding environment created by the different factor involving the CEO turnover lead to the different impact of the CEO turnover in the share price of the company. The reason for these factors creating different types of the impact in the market according to the information given in the literature review is due to the market perceiving these factors differently.

When market perceive some factors involving the CEO turnover due to highly positive or negative then this lead to the significant difference in the actual and expected return of the share of the company after these CEO turnover events.

Some of the factors which are found to be having significant influence in some of the CEO turnover cases and lead to the high difference in the actual and expected return of the share of the company are market views of the CEO departing, tenure of the CEO departing, management relationship with the departing CEO, different stakeholders’ relation with the CEO, transition planning and some other aspects like these.

The third research question asks whether the company’s risk and return impacted by these CEO turnovers in the short term. The finding which this data analysis show is that in general, the CEO turnover do not create significant difference in the risk and return of the company as there is no significant abnormal return aspects observed in these events in the data analysis part in general.

On the other hand, it has been observed that in some of the CEO turnover events which have been shown in the graph, it can be seen that there is significant difference between the expected and actual return of the share of the company. The reason for this high difference has been already discussed in the above part as the different factors involving the CEO events which create significant perception about the future of the company in the mind of the investor leading to the significant difference in the perceived return and risk of the company’s share in the market than its normal situation’s risk and return. Therefore, it can be stated that the event itself usually do not change the risk and return of the company unless any strong factor involving that CEO turnover changed the perception of the company’s future in the market leading to changed in the perceived return and risk of the company.

It has been found from in many companies, CEO behaviour becomes a real problem especially in the companies which are new to the market and these CEO bad behaviour become the reason for the company removing that CEO from the company to better the overall working environment of the company which is badly impacted due to these behavioural patterns of CEO. Some of the real-life cases in which the CEO removal can be associated with their bad behaviour and which have been discussed in this study are ex-CEO of Away company called StephKorey or Expedia’s ex-CEO called Mark Okerstorm or American Appereal company CEO called Dov Charney. Also, it has been found theoretically, the influence of the change due to the behavioural problem can also have different reaction in the market in different cases as sometime market believes that that change is not enough to change the fate of the business environment of the company.

Another reason which can be seen to common for the removal of the CEO is financial performance-related in which the CEO is found to be incapable of giving good financial result to the company. Some of these famous cases are ex-CEO of Hewlett Packard called Carly Fiorina or MacDonald’s Don Thompson. All these CEO turnover fall under the forced removal, or departure category of CEO turnover, but not all CEO turnover fall under this category, and there is the good number of CEO turnover which falls in other categories which are Voluntary departure.

This is also another leading factor influencing the impact of the CEO turnover, but this factor impact also depend on the fact how the market thinks the company will fare after the change of CEO and if it perceived that the change will not be significant, then impact of it will also not be significant in market.

However, it should be noted not all the departure of the individual as CEO of the company is forced and sometime this CEO turnover is planned by the business in such a manner in which the existing CEO also plays a significant part in his own departure. These departures can be linked with the departing CEO finding better opportunities or wanting smooth transition of CEO position in the company and therefore, thinking to reduce this own role in the company. One such recent case in which Oscar Munoz who ex-CEO resignation from United Airlines as the CEO of the company and in this case, Oscar remained in the board of director of the company but removed himself from the CEO post for a smooth transition in that position in the company and finding the timing of the departure from that position optimal in the current time.

It has been also found that in the case of the smooth transition, the negative impact of the CEO turnover is minimum according to different experts’ opinions in the market. Therefore, it can be stated that the changes of the negative impact is higher in the case of the sudden CEO turnover. The reason for this is the high financial loss incurred by the business due to this sudden exit of the CEO of the company leading to high chaos in the company and the market about the company’s future.

Therefore, the companies are suggested by the experts in the market to take some steps to mitigate the bad impact of the sudden departure of the CEO, and these steps include proper policies and procedures implementation in place for the transition of the CEO of the company. Then it has also been stated that the management of the company should interview the candidates who can be the CEO of the company regularly before making any decision regarding it. Also, it has been suggested that these interviews are kept secret with the help of the nondisclosure agreement so that there is no ego clash in the organisation.

Chapter 6 – Conclusion and Recommendation
The main conclusion which had been made from this research study is those CEO turnovers, in general, do not significant impact on the share price of the company as there is a no significant amount of abnormal return generation identified from these 62 CEO turnovers events observed of the listed companies in US and European market. However, it has been noted that the different factors involving the CEO turnovers which can significantly influence the impact of these events in the market.

Some of these factors are CEO tenure, communication of the CEO with the stakeholders of the business, the relationship between the CEO and many other factors like these. Also, another finding is that there is mainly two types of CEO turnover, which are forced replacement or departure and voluntary departure. Although, there can be different reasons which lead to the CEO leaving the organisation under the two categories discussed. Some of these reasons are performance-related, disciplinary factors, better opportunities, disagreement with the management or investors and many other reasons like these. Therefore, recommendation will be given to the investors to focus on different factors involving the CEO turnover before taking any investing decision related to the company after CEO turnover announcement.

Another recommendation to the businesses will be to prepare beforehand for any sudden CEO removal or departure by making proper policies and procedure surrounding CEO transition. Also, beforehand, keep interviewing potential candidates for the CEO position and keep it confidential to avoid any rumours in the market. All these will help the businesses reduce the negative impact of the sudden departure of CEO from the company.

Also, it has been found that there are some limitations of this study which gives a high scope of this study for further studies on these research studies. The first limitation is that only 62 events of CEO turnovers of different companies have been taken for analysis and focus has been only on only US and Europe market. Therefore, it is recommended that for further studies in this topic, the researchers use more companies for more market in the global world like including Asian or African companies.

There are only two variables have been taken into account in this study which is CEO turnover and shares price movement but many other factors related to the CEO turnovers which impact the share price of the company had been identified. Therefore, it is recommended for future studies, and the researcher can use different factor which has been found to be having power to influence the CEO turnover impact to assess all these factors impact in CEO turnover event on the share price of the company.

Then last significant limitation which has been the impact of the CEO turnover in the only short term has been taken whereas the impact can be seen in some case in the long term also. Therefore, it has been recommended for further studies on this topic to assess the impact of the CEO turnover for a longer period than immediate five days after CEO turnover announcement. Therefore, all these are the conclusion and recommendations of this research study.

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List of Figures

Figure 1: CEO Turnover in recent years 8

Figure 2: CEO Turnover due to disciplinary and non disciplinary factors 34

Figure 3: The return which have been expected normally of different companies after 62 CEO turnover events of those companies 49

Figure 4: The actual return of different companies after 62

CEO turnover events of those companies 50

Figure 5: Comparison of the average expected return and actual return of different companies after 62 CEO turnover events of those companies 51

Figure 6: Average Abnormal return of the companies after 62 CEO turnover events of those companies 52