The Effect of CEO Departure on Target Firms’ Post-Takeover Performance : Evidence from Not-Delisting Target Firms

Using a sample of target firms that do not delist from the stock market after a majority takeover, we investigate the effect of the target CEO's departure on their firms' subsequent financial performance. We find that CEO departures have a positive effect on the target firms' long-run operating performance, measured by firms' operating return on assets and return on equity. However, we do not find a significant effect of CEO turnover on target stock returns in the post-takeover period. These results are consistent with the predictions of the inefficient management hypothesis, which contrast with those of the valuable management hypothesis.The appendices for this paper are available at the following URL: "http://ssrn.com/abstract=2684050" http://ssrn.com/abstract=2684050