Chief Executive Officer/ Managing Director succession and value relevance of accounting numbers

Apart from Board of Director, top management, including Chief Executive Officer or Managing Director is also considered as an important governance mechanism of the firm. CEO plays a major role in managing and controlling business operations, thus his/her succession may significantly affect firm pe...

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Main Authors:	Sharifah Zarina Syed Ahmad, Mohamat Sabri Hassan, Romlah Jaffar
Format:	Article
Language:	English
Published:	Penerbit Universiti Kebangsaan Malaysia 2016
Online Access:	http://journalarticle.ukm.my/10751/ http://journalarticle.ukm.my/10751/ http://journalarticle.ukm.my/10751/1/11764-43525-1-PB.pdf

id	ukm-10751
recordtype	eprints
spelling	ukm-107512017-10-09T09:24:26Z http://journalarticle.ukm.my/10751/ Chief Executive Officer/ Managing Director succession and value relevance of accounting numbers Sharifah Zarina Syed Ahmad, Mohamat Sabri Hassan, Romlah Jaffar, Apart from Board of Director, top management, including Chief Executive Officer or Managing Director is also considered as an important governance mechanism of the firm. CEO plays a major role in managing and controlling business operations, thus his/her succession may significantly affect firm performance. This study aims to examine the effect of top management succession on share price. Past studies, which used the event-study methodology to evaluate immediate investors’ reactions towards top management succession had their observations done over limited time frame (window periods). Succession may impact the share price beyond the window period because the investors may use information obtained from financial statements to evaluate new top management capabilities. This study contributes to the literature by examining the effects of top management succession on share price at the end of financial years. Book value of equity per share (BE) and earnings per share (EPS) on share price is regressed at three different points of time; year of top management change (TMC), a year after top management change (TMC_1) and post occurrence years of top management change (TMC_C). Findings indicate that BE and EPS are value relevant. Findings also indicate that top management succession is not significantly related to changes in share price over a short period of time (transition year and a post transition year). However, over the longer period of time (TMC_C), our study indicates the top management succession is value relevant. Findings indicate that investors take a longer time to appreciate the new top management on their decision makings. Further analysis indicates that BE is regarded as value relevant by the investors after incorporating firm with outside successor; while EPS is value relevant for the firm with inside successor. This study supports the limited studies in Malaysia which indicate succession events have an implication on share price. Findings in this study may contribute towards strategic decision making in corporate management of public listed companies in Malaysia, specifically when board of directors are considering the top management replacement. Penerbit Universiti Kebangsaan Malaysia 2016 Article PeerReviewed application/pdf en http://journalarticle.ukm.my/10751/1/11764-43525-1-PB.pdf Sharifah Zarina Syed Ahmad, and Mohamat Sabri Hassan, and Romlah Jaffar, (2016) Chief Executive Officer/ Managing Director succession and value relevance of accounting numbers. Asian Journal of Accounting and Governance, 7 . pp. 25-40. ISSN 2180-3838 http://ejournal.ukm.my/ajac/issue/view/868/showToc
repository_type	Digital Repository
institution_category	Local University
institution	Universiti Kebangasaan Malaysia
building	UKM Institutional Repository
collection	Online Access
language	English
description	Apart from Board of Director, top management, including Chief Executive Officer or Managing Director is also considered as an important governance mechanism of the firm. CEO plays a major role in managing and controlling business operations, thus his/her succession may significantly affect firm performance. This study aims to examine the effect of top management succession on share price. Past studies, which used the event-study methodology to evaluate immediate investors’ reactions towards top management succession had their observations done over limited time frame (window periods). Succession may impact the share price beyond the window period because the investors may use information obtained from financial statements to evaluate new top management capabilities. This study contributes to the literature by examining the effects of top management succession on share price at the end of financial years. Book value of equity per share (BE) and earnings per share (EPS) on share price is regressed at three different points of time; year of top management change (TMC), a year after top management change (TMC_1) and post occurrence years of top management change (TMC_C). Findings indicate that BE and EPS are value relevant. Findings also indicate that top management succession is not significantly related to changes in share price over a short period of time (transition year and a post transition year). However, over the longer period of time (TMC_C), our study indicates the top management succession is value relevant. Findings indicate that investors take a longer time to appreciate the new top management on their decision makings. Further analysis indicates that BE is regarded as value relevant by the investors after incorporating firm with outside successor; while EPS is value relevant for the firm with inside successor. This study supports the limited studies in Malaysia which indicate succession events have an implication on share price. Findings in this study may contribute towards strategic decision making in corporate management of public listed companies in Malaysia, specifically when board of directors are considering the top management replacement.
format	Article
author	Sharifah Zarina Syed Ahmad, Mohamat Sabri Hassan, Romlah Jaffar,
spellingShingle	Sharifah Zarina Syed Ahmad, Mohamat Sabri Hassan, Romlah Jaffar, Chief Executive Officer/ Managing Director succession and value relevance of accounting numbers
author_facet	Sharifah Zarina Syed Ahmad, Mohamat Sabri Hassan, Romlah Jaffar,
author_sort	Sharifah Zarina Syed Ahmad,
title	Chief Executive Officer/ Managing Director succession and value relevance of accounting numbers
title_short	Chief Executive Officer/ Managing Director succession and value relevance of accounting numbers
title_full	Chief Executive Officer/ Managing Director succession and value relevance of accounting numbers
title_fullStr	Chief Executive Officer/ Managing Director succession and value relevance of accounting numbers
title_full_unstemmed	Chief Executive Officer/ Managing Director succession and value relevance of accounting numbers
title_sort	chief executive officer/ managing director succession and value relevance of accounting numbers
publisher	Penerbit Universiti Kebangsaan Malaysia
publishDate	2016
url	http://journalarticle.ukm.my/10751/ http://journalarticle.ukm.my/10751/ http://journalarticle.ukm.my/10751/1/11764-43525-1-PB.pdf
first_indexed	2023-09-18T19:58:21Z
last_indexed	2023-09-18T19:58:21Z
_version_	1777406681140953088

Chief Executive Officer/ Managing Director succession and value relevance of accounting numbers

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