How Does CEO Turnover Affect Performance in Energy Companies?

Abstract

In this paper, we investigate the impact of CEO turnovers on company performance in the energy industry. In the first part, we perform an event study for various event windows where we estimate the abnormal returns from stock price reactions in companies which experience CEO turnovers. In this analysis our sample comprise Nordic energy companies from Oslo Stock Exchange. We find evidence that CEO turnovers affect the abnormal returns negatively for the first event windows, i.e. the day of the event and the day posterior to the event. In the second part we use accounting related measures. Here, our data comprise private Norwegian energy companies. Moreover, we assess how the performance measures impact CEO turnovers, and if CEO turnovers lead to changes in the performance measures. We find that one out of two accounting measures impact the probability of a CEO turnover occurring, and that CEO turnovers on average do not lead to changes in performance. We conclude that CEO turnovers affect company performance if we look at stock price reactions, however, there is no impact when studying the accounting related measures.