IDEAS home Printed from https://ideas.repec.org/a/eco/journ1/2017-02-70.html
   My bibliography  Save this article

Does Chief Executive Officer Succession Affect Firms Financial Performance in Nigeria?

Author

Listed:
  • Stephen A. Ojeka

    (Department of Accounting, Covenant University, Ota, Ogun State, Nigeria,)

  • Dorcas T. Adetula

    (Department of Accounting, Covenant University, Ota, Ogun State, Nigeria,)

  • Dick O. Mukoro

    (Department of Accounting, Covenant University, Ota, Ogun State, Nigeria)

  • Oyintinane P. Kpokpo

    (Department of Accounting, Covenant University, Ota, Ogun State, Nigeria.)

Abstract

This study examined empirically the impact of Chief Executive Officer (CEO) succession on the financial performance of firms listed on the Nigerian stock exchange. For the purpose of this research, secondary data was used and the instruments of data collection were financial statements. Amatchedpaired t-test was used in testing the hypothesis. The overall results show that using return on asset, return on equity, return on capital employed and Tobin's Q as a measure of performance; companies that experienced forced CEO turnovers had disrupted performances and therefore experienced decreased performance following CEO succession. The results also show a significant decline in the performance of companies that had insider successors. However, the study found increase performance in firms where the CEO voluntarily resigns and an outsider took over as the CEO. As CEO succession has a significant impact on subsequent performance of Nigerian firms, this study therefore recommends that board should have well-structured succession plans that would define what exactly is the goal of the firms and the type of successor required to fit in. In addition the apparent successors should be assessed based on the proficiencies needed to achieve high financial and organizational performance and the capabilities and profile necessary to undertake the role of the CEO should be properly defined. This should include a narrative explanation of the required skill, competencies, attitudes, knowledge and other important abilities required for a standard performance.

Suggested Citation

  • Stephen A. Ojeka & Dorcas T. Adetula & Dick O. Mukoro & Oyintinane P. Kpokpo, 2017. "Does Chief Executive Officer Succession Affect Firms Financial Performance in Nigeria?," International Journal of Economics and Financial Issues, Econjournals, vol. 7(2), pages 530-535.
    • Handle: RePEc:eco:journ1:2017-02-70
    as

    Download full text from publisher

    File URL: http://www.econjournals.com/index.php/ijefi/article/download/4092/pdf
    Download Restriction: no
    File URL: http://www.econjournals.com/index.php/ijefi/article/view/4092/pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Benjamin Maury, 2006. "Corporate Performance, Corporate Governance and Top Executive Turnover in Finland," European Financial Management, European Financial Management Association, vol. 12(2), pages 221-248, March.
    2. Denis, David J. & Denis, Diane K. & Sarin, Atulya, 1997. "Ownership structure and top executive turnover," Journal of Financial Economics, Elsevier, vol. 45(2), pages 193-221, August.
    3. Ayse Karaevli, 2007. "Performance consequences of new CEO ‘Outsiderness’: Moderating effects of pre‐ and post‐succession contexts," Strategic Management Journal, Wiley Blackwell, vol. 28(7), pages 681-706, July.
    4. Weisbach, Michael S., 1988. "Outside directors and CEO turnover," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 431-460, January.
    5. Salas, Jesus M., 2010. "Entrenchment, governance, and the stock price reaction to sudden executive deaths," Journal of Banking & Finance, Elsevier, vol. 34(3), pages 656-666, March.
    6. Jong C. Rhim & Joy V. Peluchette & Inam Song, 2006. "Stock Market Reactions and Firm Performance Surrounding CEO Succession: Antecedents of Succession and Successor Origin," American Journal of Business, Emerald Group Publishing, vol. 21(1), pages 21-30.
    7. Rokiah Ishak & Ku Nor Izah Ku Ismail & Shamsul Nahar Abdullah, 2013. "CEO Succession and Firm Performance: Evidence from Publicly Listed Malaysian Firms," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 9(2), pages 29-48.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Muna Al Suwaidi & Fauzia Jabeen & Agata Stachowicz-Stanusch & Matthew Webb, 2020. "Determinants Linked to Executive Succession Planning in Public Sector Organizations," Vision, , vol. 24(3), pages 284-299, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Quoc Trung Tran & Xuan Minh Nguyen & Tien Hoang Nguyen, 2016. "CEO duality, state shareholder and CEO turnover: Evidence from Vietnamese stock market," Business and Economic Horizons (BEH), Prague Development Center, vol. 12(3), pages 113-120, September.
    2. Nera Marinda Machdar, 2019. "Does CEO Turnover Affect Stock Market Performance through Company Performance in Indonesian Companies?," International Journal of Applied Economics, Finance and Accounting, Online Academic Press, vol. 4(1), pages 15-21.
    3. Peter Cziraki & Dirk Jenter, 2021. "The Market for CEOs," CESifo Working Paper Series 9143, CESifo.
    4. Hadem, Michael, 2010. "Bedingungen und Konsequenzen des Wechsels von Finanzvorständen - Eine Analyse in großen börsennotierten Unternehmen," EconStor Theses, ZBW - Leibniz Information Centre for Economics, number 43681, September.
    5. González, Maximiliano & Guzmán, Alexander & Pablo, Eduardo & Trujillo, María-Andrea, 2019. "Is board turnover driven by performance in family firms?," Research in International Business and Finance, Elsevier, vol. 48(C), pages 169-186.
    6. Guoli Chen & Donald C. Hambrick, 2012. "CEO Replacement in Turnaround Situations: Executive (Mis)Fit and Its Performance Implications," Organization Science, INFORMS, vol. 23(1), pages 225-243, February.
    7. David Hillier & Patrick McColgan, 2008. "An analysis of majority owner‐managed companies in the UK," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 48(4), pages 603-623, December.
    8. He, Xiaoxiao & Zhu, Margaret Rui, 2020. "Are interim CEOs just caretakers?," Journal of Corporate Finance, Elsevier, vol. 61(C).
    9. Dherment-Ferere, Isabelle & Köke, Jens & Renneboog, Luc, 2001. "Corporate monitoring by blockholders in Europe: empirical evidence of managerial disciplining in Belgium, France, Germany, and the UK," ZEW Discussion Papers 01-24, ZEW - Leibniz Centre for European Economic Research.
    10. Kato, Takao & Long, Cheryl, 2006. "CEO Turnover, Firm Performance and Enterprise Reform in China: Evidence from New Micro Data," IZA Discussion Papers 1914, Institute of Labor Economics (IZA).
    11. Graham, John R. & Kim, Hyunseob & Leary, Mark, 2020. "CEO-board dynamics," Journal of Financial Economics, Elsevier, vol. 137(3), pages 612-636.
    12. Nadide BANU OLCAY GÜNER, 2023. "Incentivizing CEOs via pay and forced turnover: Do tenure and managerial ability matter?," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(1(634), S), pages 37-66, Spring.
    13. Dah, Mustafa A. & Frye, Melissa B., 2017. "Is board compensation excessive?," Journal of Corporate Finance, Elsevier, vol. 45(C), pages 566-585.
    14. Ji, Jiao & Talavera, Oleksandr & Yin, Shuxing, 2016. "CEO Dismissal, Compensation and Topics of Board Meetings: The Case of China," MPRA Paper 70232, University Library of Munich, Germany.
    15. Srivastav, Abhishek & Keasey, Kevin & Mollah, Sabur & Vallascas, Francesco, 2017. "CEO turnover in large banks: Does tail risk matter?," Journal of Accounting and Economics, Elsevier, vol. 64(1), pages 37-55.
    16. Ronald Anderson & Cecilia Bustamante & Stéphane Guibaud & Mihail Zervos, 2018. "Agency, Firm Growth, and Managerial Turnover," Post-Print hal-03391936, HAL.
    17. Fernández Méndez, Carlos & Pathan, Shams & Arrondo García, Rubén, 2015. "Monitoring capabilities of busy and overlap directors: Evidence from Australia," Pacific-Basin Finance Journal, Elsevier, vol. 35(PA), pages 444-469.
    18. McNeil, Chris & Niehaus, Greg & Powers, Eric, 2004. "Management turnover in subsidiaries of conglomerates versus stand-alone firms," Journal of Financial Economics, Elsevier, vol. 72(1), pages 63-96, April.
    19. Kim, Byungmo & Lee, Inmoo, 2003. "Agency problems and performance of Korean companies during the Asian financial crisis: Chaebol vs. non-chaebol firms," Pacific-Basin Finance Journal, Elsevier, vol. 11(3), pages 327-348, July.
    20. Renneboog, L.D.R. & Trojanowski, G., 2002. "The Managerial Labor Market and the Governance Role of Shareholder Control Structures in the UK," Other publications TiSEM aee04553-20a7-475a-96e1-7, Tilburg University, School of Economics and Management.

    More about this item

    Keywords

    Chief Executive Officer Succession; Financial Performance; Nigerian Stock Exchange; Firms and Competencies;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G1 - Financial Economics - - General Financial Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eco:journ1:2017-02-70. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ilhan Ozturk (email available below). General contact details of provider: http://www.econjournals.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.