Title: New brooms: the stock market reaction to foreign CEO succession in Switzerland
Authors: Daniel Seelhofer
Addresses: Center for International Business, Zurich University of Applied Sciences, ZHAW School of Management and Law, St. Georgenplatz 2, CH-8401 Winterthur, Switzerland
Abstract: Using event study methodology, this paper examines the immediate investor reaction to foreign and domestic CEO succession announcements in internationalised firms and analyses whether the stock market reacts differently to the two. Results suggest that crossover successions (e.g. where a foreigner follows a domestic CEO) lead to a significant negative reaction during the days immediately surrounding the succession event, whereas regular, i.e. non-crossover, successions are not associated with significant abnormal returns. It is concluded that the stock market punishes socio-cultural dissimilarity between successor and predecessor because it contributes to uncertainty about the succession.
Keywords: foreign CEOs; chief executive officers; leadership; Switzerland; event studies; stock markets; new brooms; investors; domestic CEOs; internationalised firms; crossover successions; negative reactions; abnormal returns; non-crossover successions; socio-cultural dissimilarities; successors; predecessors; uncertainty; foreign nationals; multinational corporations; MNCs; Europe; international management.
European Journal of International Management, 2010 Vol.4 No.5, pp.506 - 523
Published online: 31 Aug 2010 *
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