Stock price effects of CEO turnover of US financial institutions

We use stock price reactions of CEO turnover announcements to analyse managerial effectiveness and entrenchment within the financial sector that is characterised by a greater information asymmetry. We distinguish among different types of changes in top executives to insulate different market effects. First, tests with resignations/retirements, excluding M&A and the financial crisis, suggest effectiveness of the CEOs for their firms. Second, tests with resignations/retirements, related to M&A, indicate positive effect of the external control market. Third, forced CEO resignations/retirements show ineffective firm monitoring, and CEO deaths support managerial entrenchment. Resignations related to bankruptcy have negative market effects, and the coefficients of tests during the financial crisis are larger with similar signs.