Does CEO Turnover Matter? Empirical Evidence from the Philippines

This study investigated the market reaction to announcements of CEO turnovers in Philippine-listed companies between January 2008 and December 2018. Turnovers were classified concerning successors’ origin (internal versus external), turnover type (forced versus voluntary), and successors’ gender (male versus female). Event study methodology using the market model was employed to analyze the hand-collected sample of 136 CEO turnover announcements. Market reaction was significantly positive for internal, external, and voluntary turnover. The market reaction, however, was found to be significantly negative in the case of forced turnover. Similarly, concerning the gender difference, the result showed that market reaction was significantly negative for female CEO appointments and significantly positive for male CEOs. The results provide strong evidence that new CEOs’ selected attributes and the turnover’s characteristics are factors that have the explanatory power on the investor’s reaction. The contributions of this study to the literature are threefold. First, it serves as the first empirical evidence of market reaction to CEO turnover from the Philippines emerging market. This study also confirms the finding of the previous studies on CEO turnover by looking into several turnover categories, namely external, internal, forced, and voluntary. Finally, it enriches the limited empirical evidence on the CEOs’ gender effect on abnormal return surrounding the turnover announcement date.