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THE EFFECT OF CEO CHANGE ON STOCK RETURN WITHIN THE PERSPECTIVE OF UPPER ECHELONS THEORY

Year 2024, Issue: 60, 91 - 102, 17.01.2024

Beste Altınçubuk , Serkan Unal

https://doi.org/10.30794/pausbed.1353644

Abstract

The Upper Echelons Theory states that the characteristics of individuals in top management have a significant impact on firm
performance and strategies. In line with this, in this study, the relationship between CEO change, frequency of CEO change,
CEO tenure, and stock price performance has been examined. In the research, the year of the CEO change and the stock
performance in the following year were used as dependent variables. CEO change, the frequency of CEO change and the year
the CEO spent in the same position were used as independent variables. In the research, the CEO position of the companies
in the BIST100 index in the years 2011-2021 and the stock performance data in the years 2011-2022 were used. According
to the results obtained from the research; there is no statistically significant relationship between CEO change, CEO turnover
frequency and CEO tenure and stock price performance.

Keywords

CEO Değişimi Hisse Getirisi Borsa İstanbul

References

  • Allgood, S., & Farrell, K. A. (2000). The effect of CEO tenure on the relation between firm performance and turnover. Journal of financial research, 23(3), 373-390.
  • Ararat, M., Suel, E., & Yurtoglu, B. B. (2014). Sustainable investment in Turkey: the case in context-an update. Available at SSRN 2447937.
  • Beatty, R. P., & Zajac, E. J. (1987). CEO change and firm performance in large corporations: Succession effects and manager effects. Strategic Management Journal, 8(4), 305-317.
  • Choi, J. H., Kim, S., & Lee, A. (2019). CEO tenure, corporate social performance, and corporate governance: A Korean study. Sustainability, 12(1), 99.
  • Conyon, M. J., & He, L. (2020). CEO turnover in China: The role of market-based and accounting performance measures. In The Chinese Capital Markets (pp. 77-100). Routledge.
  • Crossland, C., & Hambrick, D. C. (2011). Differences in managerial discretion across countries: how nation‐level institutions affect the degree to which CEOs matter. Strategic Management Journal, 32(8), 797-819.
  • Daily, C. M., & Johnson, J. L. (1997). Sources of CEO power and firm financial performance: A longitudinal assessment. Journal of Management, 23(2), 97-117.
  • Doğan, M., Ağca, V., & Karayel, M. (2016). Türkiye’de CEO değişimine etki eden faktörler ve değişiminin finansal performans üzerindeki etkisi. Business and Economics Research Journal, 7(2), 15-27.
  • Durgun, A. F., Attila, İ., & Aktaş, R. (2023). CEO Turnover: The Impact Of The CEO’s Internal and External Appointment On Company Success. Uluslararası İktisadi ve İdari İncelemeler Dergisi, (40), 69-82.
  • Dursun, İ. T., & Köseoğlu, Y. (2016). Üst kademe teorisi’ni yeniden düşünmek: Üst yönetim ekiplerinin bilişsel özellikleri & teorik açıdan kapsamı ve önemi. İşletme ve İktisat Çalışmaları Dergisi, 4(4), 117-133.
  • Farrell, K. A., & Whidbee, D. A. (2003). Impact of firm performance expectations on CEO turnover and replacement decisions. Journal of accounting and economics, 36(1-3), 165-196.
  • Gao, H., Harford, J., & Li, K. (2017). CEO turnover–performance sensitivity in private firms. Journal of financial and quantitative analysis, 52(2), 583-611.
  • Hambrick, D. C., & Fukutomi, G. D. (1991). The seasons of a CEO's tenure. Academy of management review, 16(4), 719-742.
  • Hambrick, D. C., & Mason, P. A. (1984). Upper echelons: The organization as a reflection of its top managers. Academy of management review, 9(2), 193-206.
  • Hambrick, D. C. (2007). Upper echelons theory: An update. Academy of management review, 32(2), 334-343.
  • Henderson, A. D., Miller, D., & Hambrick, D. C. (2006). How quickly do CEOs become obsolete? Industry dynamism, CEO tenure, and company performance. Strategic Management Journal, 27(5), 447-460.
  • Hou, W., Priem, R. L., & Goranova, M. (2017). Does one size fit all? Investigating pay–future performance relationships over the “seasons” of CEO tenure. Journal of Management, 43(3), 864-891.
  • House, R. J., Hanges, P. J., Javidan, M., Dorfman, P. W., & Gupta, V. (Eds.). (2004). Culture, leadership, and organizations: The GLOBE study of 62 societies. Sage publications.
  • Kaplan, S. N., & Minton, B. (2006). How has CEO turnover changed? Increasingly performance sensitive boards and increasingly uneasy CEOs. http://www.nber.org/papers/w12465.
  • Jenter, D., & Kanaan, F. (2015). CEO turnover and relative performance evaluation. The Journal of Finance, 70(5), 2155-2184.
  • Jenter, D., & Lewellen, K. (2021). Performance-induced CEO turnover. The Review of Financial Studies, 34(2), 569-617.
  • Kato, T., & Long, C. (2006). Executive turnover and firm performance in China. American Economic Review, 96(2), 363-367.
  • Khurana, R., & Nohria, N. (2000). The performance consequences of CEO turnover. Available at SSRN 219129.
  • Prime, P. B. (2007). Firm performance and CEO turnover in China: implications for Chinese equity markets and corporate governance. Academy of Management Perspectives, 21(2), 78-80
  • Puffer, S. M., & Weintrop, J. B. (1991). Corporate performance and CEO turnover: The role of performance expectations. Administrative Science Quarterly, 1-19.
  • Sridharan, U. V., & St. John, C. H. (1998). The effects of organizational stability and leadership structure on firm performance. Journal of Managerial Issues, 469-484.
  • Simsek, Z. (2007). CEO tenure and organizational performance: An intervening model. Strategic Management Journal, 28(6), 653-662.
  • Süsay, A., & Tanrıöven, C. (2023). Yatırımcıların Sürü Davranışı Eğilimleri ve Para Politikasının Sürü Davranışına Etkisi: BIST Örneği. Maliye Dergisi, 184:41-73
  • Unal, S., & Doğru, Ç. (2021). Üst Kademe Kuramı Kapsamında Hisse Getirileri Üzerinde CEO’nun Özelliklerinin Etkisi. Süleyman Demirel Üniversitesi Vizyoner Dergisi, 12(29), 204-223.
  • Yamak, S., Nielsen, S., & Escribá-Esteve, A. (2014). The role of external environment in upper echelons theory: A review of existing literature and future research directions. Group & Organization Management, 39(1), 69-109.
  • Zhang, Y., & Wiersema, M. F. (2009). Stock market reaction to CEO certification: The signaling role of CEO background. Strategic Management Journal, 30(7), 693-710.

THE EFFECT OF CEO CHANGE ON STOCK RETURN WITHIN THE PERSPECTIVE OF UPPER ECHELONS THEORY

Year 2024, Issue: 60, 91 - 102, 17.01.2024

Beste Altınçubuk , Serkan Unal

https://doi.org/10.30794/pausbed.1353644

Abstract

The Upper Echelons Theory states that the characteristics of individuals in top management have a significant impact on firm performance and strategies. In line with this, in this study, the relationship between CEO change, frequency of CEO change, CEO tenure, and stock price performance has been examined. In the research, the year of the CEO change and the stock performance in the following year were used as dependent variables. CEO change, the frequency of CEO change and the year the CEO spent in the same position were used as independent variables. In the research, the CEO position of the companies in the BIST100 index in the years 2011-2021 and the stock performance data in the years 2011-2022 were used. According to the results obtained from the research; there is no statistically significant relationship between CEO change, CEO turnover frequency and CEO tenure and stock price performance.

Keywords

CEO Change Stock Return Borsa İstanbul

References

  • Allgood, S., & Farrell, K. A. (2000). The effect of CEO tenure on the relation between firm performance and turnover. Journal of financial research, 23(3), 373-390.
  • Ararat, M., Suel, E., & Yurtoglu, B. B. (2014). Sustainable investment in Turkey: the case in context-an update. Available at SSRN 2447937.
  • Beatty, R. P., & Zajac, E. J. (1987). CEO change and firm performance in large corporations: Succession effects and manager effects. Strategic Management Journal, 8(4), 305-317.
  • Choi, J. H., Kim, S., & Lee, A. (2019). CEO tenure, corporate social performance, and corporate governance: A Korean study. Sustainability, 12(1), 99.
  • Conyon, M. J., & He, L. (2020). CEO turnover in China: The role of market-based and accounting performance measures. In The Chinese Capital Markets (pp. 77-100). Routledge.
  • Crossland, C., & Hambrick, D. C. (2011). Differences in managerial discretion across countries: how nation‐level institutions affect the degree to which CEOs matter. Strategic Management Journal, 32(8), 797-819.
  • Daily, C. M., & Johnson, J. L. (1997). Sources of CEO power and firm financial performance: A longitudinal assessment. Journal of Management, 23(2), 97-117.
  • Doğan, M., Ağca, V., & Karayel, M. (2016). Türkiye’de CEO değişimine etki eden faktörler ve değişiminin finansal performans üzerindeki etkisi. Business and Economics Research Journal, 7(2), 15-27.
  • Durgun, A. F., Attila, İ., & Aktaş, R. (2023). CEO Turnover: The Impact Of The CEO’s Internal and External Appointment On Company Success. Uluslararası İktisadi ve İdari İncelemeler Dergisi, (40), 69-82.
  • Dursun, İ. T., & Köseoğlu, Y. (2016). Üst kademe teorisi’ni yeniden düşünmek: Üst yönetim ekiplerinin bilişsel özellikleri & teorik açıdan kapsamı ve önemi. İşletme ve İktisat Çalışmaları Dergisi, 4(4), 117-133.
  • Farrell, K. A., & Whidbee, D. A. (2003). Impact of firm performance expectations on CEO turnover and replacement decisions. Journal of accounting and economics, 36(1-3), 165-196.
  • Gao, H., Harford, J., & Li, K. (2017). CEO turnover–performance sensitivity in private firms. Journal of financial and quantitative analysis, 52(2), 583-611.
  • Hambrick, D. C., & Fukutomi, G. D. (1991). The seasons of a CEO's tenure. Academy of management review, 16(4), 719-742.
  • Hambrick, D. C., & Mason, P. A. (1984). Upper echelons: The organization as a reflection of its top managers. Academy of management review, 9(2), 193-206.
  • Hambrick, D. C. (2007). Upper echelons theory: An update. Academy of management review, 32(2), 334-343.
  • Henderson, A. D., Miller, D., & Hambrick, D. C. (2006). How quickly do CEOs become obsolete? Industry dynamism, CEO tenure, and company performance. Strategic Management Journal, 27(5), 447-460.
  • Hou, W., Priem, R. L., & Goranova, M. (2017). Does one size fit all? Investigating pay–future performance relationships over the “seasons” of CEO tenure. Journal of Management, 43(3), 864-891.
  • House, R. J., Hanges, P. J., Javidan, M., Dorfman, P. W., & Gupta, V. (Eds.). (2004). Culture, leadership, and organizations: The GLOBE study of 62 societies. Sage publications.
  • Kaplan, S. N., & Minton, B. (2006). How has CEO turnover changed? Increasingly performance sensitive boards and increasingly uneasy CEOs. http://www.nber.org/papers/w12465.
  • Jenter, D., & Kanaan, F. (2015). CEO turnover and relative performance evaluation. The Journal of Finance, 70(5), 2155-2184.
  • Jenter, D., & Lewellen, K. (2021). Performance-induced CEO turnover. The Review of Financial Studies, 34(2), 569-617.
  • Kato, T., & Long, C. (2006). Executive turnover and firm performance in China. American Economic Review, 96(2), 363-367.
  • Khurana, R., & Nohria, N. (2000). The performance consequences of CEO turnover. Available at SSRN 219129.
  • Prime, P. B. (2007). Firm performance and CEO turnover in China: implications for Chinese equity markets and corporate governance. Academy of Management Perspectives, 21(2), 78-80
  • Puffer, S. M., & Weintrop, J. B. (1991). Corporate performance and CEO turnover: The role of performance expectations. Administrative Science Quarterly, 1-19.
  • Sridharan, U. V., & St. John, C. H. (1998). The effects of organizational stability and leadership structure on firm performance. Journal of Managerial Issues, 469-484.
  • Simsek, Z. (2007). CEO tenure and organizational performance: An intervening model. Strategic Management Journal, 28(6), 653-662.
  • Süsay, A., & Tanrıöven, C. (2023). Yatırımcıların Sürü Davranışı Eğilimleri ve Para Politikasının Sürü Davranışına Etkisi: BIST Örneği. Maliye Dergisi, 184:41-73
  • Unal, S., & Doğru, Ç. (2021). Üst Kademe Kuramı Kapsamında Hisse Getirileri Üzerinde CEO’nun Özelliklerinin Etkisi. Süleyman Demirel Üniversitesi Vizyoner Dergisi, 12(29), 204-223.
  • Yamak, S., Nielsen, S., & Escribá-Esteve, A. (2014). The role of external environment in upper echelons theory: A review of existing literature and future research directions. Group & Organization Management, 39(1), 69-109.
  • Zhang, Y., & Wiersema, M. F. (2009). Stock market reaction to CEO certification: The signaling role of CEO background. Strategic Management Journal, 30(7), 693-710.
There are 31 citations in total.

Details

Primary Language Turkish
Subjects Finance, Organizasyon
Journal Section Research Article
Authors

Beste Altınçubuk 0000-0002-0894-2372

Serkan Unal 0000-0002-7060-979X

Early Pub Date January 17, 2024
Publication Date January 17, 2024
Acceptance Date November 10, 2023
Published in Issue Year 2024 Issue: 60

Cite

APA Altınçubuk, B., & Unal, S. (2024). THE EFFECT OF CEO CHANGE ON STOCK RETURN WITHIN THE PERSPECTIVE OF UPPER ECHELONS THEORY. Pamukkale Üniversitesi Sosyal Bilimler Enstitüsü Dergisi(60), 91-102. https://doi.org/10.30794/pausbed.1353644
AMA Altınçubuk B, Unal S. THE EFFECT OF CEO CHANGE ON STOCK RETURN WITHIN THE PERSPECTIVE OF UPPER ECHELONS THEORY. PAUSBED. January 2024;(60):91-102. doi:10.30794/pausbed.1353644
Chicago Altınçubuk, Beste, and Serkan Unal. “THE EFFECT OF CEO CHANGE ON STOCK RETURN WITHIN THE PERSPECTIVE OF UPPER ECHELONS THEORY”. Pamukkale Üniversitesi Sosyal Bilimler Enstitüsü Dergisi, no. 60 (January 2024): 91-102. https://doi.org/10.30794/pausbed.1353644.
EndNote Altınçubuk B, Unal S (January 1, 2024) THE EFFECT OF CEO CHANGE ON STOCK RETURN WITHIN THE PERSPECTIVE OF UPPER ECHELONS THEORY. Pamukkale Üniversitesi Sosyal Bilimler Enstitüsü Dergisi 60 91–102.
IEEE B. Altınçubuk and S. Unal, “THE EFFECT OF CEO CHANGE ON STOCK RETURN WITHIN THE PERSPECTIVE OF UPPER ECHELONS THEORY”, PAUSBED, no. 60, pp. 91–102, January 2024, doi: 10.30794/pausbed.1353644.
ISNAD Altınçubuk, Beste - Unal, Serkan. “THE EFFECT OF CEO CHANGE ON STOCK RETURN WITHIN THE PERSPECTIVE OF UPPER ECHELONS THEORY”. Pamukkale Üniversitesi Sosyal Bilimler Enstitüsü Dergisi 60 (January 2024), 91-102. https://doi.org/10.30794/pausbed.1353644.
JAMA Altınçubuk B, Unal S. THE EFFECT OF CEO CHANGE ON STOCK RETURN WITHIN THE PERSPECTIVE OF UPPER ECHELONS THEORY. PAUSBED. 2024;:91–102.
MLA Altınçubuk, Beste and Serkan Unal. “THE EFFECT OF CEO CHANGE ON STOCK RETURN WITHIN THE PERSPECTIVE OF UPPER ECHELONS THEORY”. Pamukkale Üniversitesi Sosyal Bilimler Enstitüsü Dergisi, no. 60, 2024, pp. 91-102, doi:10.30794/pausbed.1353644.
Vancouver Altınçubuk B, Unal S. THE EFFECT OF CEO CHANGE ON STOCK RETURN WITHIN THE PERSPECTIVE OF UPPER ECHELONS THEORY. PAUSBED. 2024(60):91-102.
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