This study investigates the effects of CEO succession on the financial performance of large publicly held corporations over the 16-year period of 1978 to 1994. The significance of our study is threefold: (1) while many studies have separately investigated either stock market reactions or financial performance surrounding CEO succession, the proposed study investigates both aspects of CEO succession; (2) using a market signalling framework, this study examines whether or not the stock market correctly responds to the expected financial performance of the firm at the announcement of CEO succession; and (3) this study investigates the association between successor origin and demongraphics, and the ownership structure of the firm. Testable hypotheses are developed to further examine differences in firm performance with respect to the origin of CEO succession and two ownership structure variables (i.e., insider holdings and institutional holdings).
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