The Market Effects of Ceo Turnover in Australian Firms
Pacific-Basin Finance Journal 9 Ž2001. 1–27 www.elsevier.comrlocatereconbase
The market effects of CEO turnover in Australian firms
Jo-Ann Suchard a,) , Manohar Singh b, Robert Barr c a School of Banking and Finance, UniÕersity of New South Wales, New South Wales 2052, Australia b Long Island UniÕersity, New York, USA c Commonwealth Bank of Australia, Australia
Abstract We examine the relationship between the monitoring of CEOs by inside and outside directors and CEO turnover in the Australian market. Australian board structures and mechanisms are more similar to those in the USrUK but market activity characteristics are more similar to JapaneserGerman systems. The results suggest that there is a relationship between CEO turnover and lagged performance rather than current performance as found in the US. In addition, non-executive directors and independent directors are more likely to monitor management. However, there is a size effect as the results are driven by large firms. The difference in the results may be due to differences in the behaviour of United States and Australian institutional stockholders in solving corporate governance issues. Furthermore, a negative lagged market reaction is found on the announcement of the CEO change. However, the reaction is driven by a sub-sample of firms with non-independent boards and prior positive performance that may proxy for retirements. q 2001 Elsevier Science B.V. All rights reserved.
JEL classification: G32 Keywords: Corporate governance; Australia; CEO change
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Corresponding author. Tel.: q 61-2-98355876; fax: q 61-2-93856347. E-mail address: j.suchard@unsw.edu.au ŽJ.-A. Suchard..
0927-538Xr01r$ - see front matter q 2001 Elsevier Science B.V. All rights reserved. PII: S 0 9 2 7 - 5 3 8 X Ž 0 0 . 0 0 0 3 2 - 9
2
J.-A. Suchard et al.r Pacific-Basin Finance Journal 9 (2001) 1–27
1. Introduction An efficient corporate governance system characterises a multiplicity of mechanisms to ensure
The market effects of CEO turnover in Australian firms
Jo-Ann Suchard a,) , Manohar Singh b, Robert Barr c a School of Banking and Finance, UniÕersity of New South Wales, New South Wales 2052, Australia b Long Island UniÕersity, New York, USA c Commonwealth Bank of Australia, Australia
Abstract We examine the relationship between the monitoring of CEOs by inside and outside directors and CEO turnover in the Australian market. Australian board structures and mechanisms are more similar to those in the USrUK but market activity characteristics are more similar to JapaneserGerman systems. The results suggest that there is a relationship between CEO turnover and lagged performance rather than current performance as found in the US. In addition, non-executive directors and independent directors are more likely to monitor management. However, there is a size effect as the results are driven by large firms. The difference in the results may be due to differences in the behaviour of United States and Australian institutional stockholders in solving corporate governance issues. Furthermore, a negative lagged market reaction is found on the announcement of the CEO change. However, the reaction is driven by a sub-sample of firms with non-independent boards and prior positive performance that may proxy for retirements. q 2001 Elsevier Science B.V. All rights reserved.
JEL classification: G32 Keywords: Corporate governance; Australia; CEO change
)
Corresponding author. Tel.: q 61-2-98355876; fax: q 61-2-93856347. E-mail address: j.suchard@unsw.edu.au ŽJ.-A. Suchard..
0927-538Xr01r$ - see front matter q 2001 Elsevier Science B.V. All rights reserved. PII: S 0 9 2 7 - 5 3 8 X Ž 0 0 . 0 0 0 3 2 - 9
2
J.-A. Suchard et al.r Pacific-Basin Finance Journal 9 (2001) 1–27
1. Introduction An efficient corporate governance system characterises a multiplicity of mechanisms to ensure
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