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An analysis of stock price reaction to management change in distressed firms

1989; Elsevier BV; Volume: 11; Issue: 1 Linguagem: Inglês

10.1016/0165-4101(89)90015-3

1879-1980

Karl-Adam Bonnier, Robert F. Bruner,

Banking stability, regulation, efficiency

This study analyzes excess returns to shareholders at announcement of a change in senior management of distressed firms. Excess returns are significantly positive, which is consistent with the internal corporate control hypothesis that management change following poor performance is associated with gains to shareholders. Cross-sectional tests of the effects reveal a significant title effect and significant interactions between title and appointment of an outside successor and title and firm size. These findings present new insights into the circumstances in which external vs. internal markets for managers will affect shareholder wealth.