Does CEO Turnover Affect Stock Market Performance through Company Performance in Indonesian Companies?

Abstract

This study analyzes whether CEO turnover affects stock market performance through company performance in Indonesian companies. Specifically, this study examines: (1) Does the CEO turnover affect the stock market performance? (2) Does the CEO turnover affect the company performance and (3) Does the CEO turnover affect the stock market performance through the company performance? This study does not test the CEO turnover due to death, forced resignation, voluntary departures, and age-related retirement considering that almost all companies in Indonesia are family companies. This study uses the manufacturing companies listed on the Indonesia Stock Exchange as an analysis unit with the study period during 2010-2015. The finding of this study concludes that (1) the CEO turnover has a positive effect on the stock market performance, (2) the CEO turnover has a positive effect on the company performance, and (3) the CEO turnover does not affect the stock market performance through the company performance. This study has an implication from a theoretical perspective, i.e. the CEO turnover has a positive effect on the stock market performance and the company performance. However, CEO turnover does not affect the stock market performance through company performance. Then, the company performance is not an intervening variable of the effect of the CEO turnover on the stock market performance.