CEO Turnover and corporate governance: evidence from Korea

Abstract

This paper examines the impact of corporate governance on the announcement effect of CEO turnover. Using 567 announcements of Korean firms, we find CEO turnover has a significant negative effect on the firm value. In particular, non-chaebol firms experience significantly negative stock returns and lower stock return declines with higher ownership concentration on the dominant shareholder. This suggests that higher dominant ownership works in favor of shareholder`s wealth except for chaebol-affiliated firms. Overall, our evidence suggests that corporate governance is effective in an emerging market but does not prevent the opportunistic behavior of strong indigenous managers.