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CEO Dismissal: the Impact on Company Financial Results
This paper examines the influence of executive dismissal on company financial results in the short and long run in the largest European companies. For the study, the database of 31 companies from 7 countries with CEO dismissals for 2008-2013 was collected. The entire sample includes 34 CEO dismissals. The study of the turnover effect in the long-term implies the lag in the model so that the whole time period for the study is 2008-2014. Citing weaknesses in the prior literature, a new approach is brought to re-examine the issue. For example, a relatively unbiased system of classification of CEO departures using both company announcements and media reports was used in the current research. Using an event study approach and the market model, no statistically significant CEO dismissal effect was found. By means of regression analysis it was found that CEO dismissal has a positive effect on company return on assets (ROA) next year after CEO departure.