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Does Chief Executive Officer Succession Affect Firms Financial Performance in Nigeria?

Author

Listed:
  • Stephen A. Ojeka

    (Department of Accounting, Covenant University, Ota, Ogun State, Nigeria,)

  • Dorcas T. Adetula

    (Department of Accounting, Covenant University, Ota, Ogun State, Nigeria,)

  • Dick O. Mukoro

    (Department of Accounting, Covenant University, Ota, Ogun State, Nigeria)

  • Oyintinane P. Kpokpo

    (Department of Accounting, Covenant University, Ota, Ogun State, Nigeria.)

Abstract

This study examined empirically the impact of Chief Executive Officer (CEO) succession on the financial performance of firms listed on the Nigerian stock exchange. For the purpose of this research, secondary data was used and the instruments of data collection were financial statements. Amatchedpaired t-test was used in testing the hypothesis. The overall results show that using return on asset, return on equity, return on capital employed and Tobin's Q as a measure of performance; companies that experienced forced CEO turnovers had disrupted performances and therefore experienced decreased performance following CEO succession. The results also show a significant decline in the performance of companies that had insider successors. However, the study found increase performance in firms where the CEO voluntarily resigns and an outsider took over as the CEO. As CEO succession has a significant impact on subsequent performance of Nigerian firms, this study therefore recommends that board should have well-structured succession plans that would define what exactly is the goal of the firms and the type of successor required to fit in. In addition the apparent successors should be assessed based on the proficiencies needed to achieve high financial and organizational performance and the capabilities and profile necessary to undertake the role of the CEO should be properly defined. This should include a narrative explanation of the required skill, competencies, attitudes, knowledge and other important abilities required for a standard performance.

Suggested Citation

  • Stephen A. Ojeka & Dorcas T. Adetula & Dick O. Mukoro & Oyintinane P. Kpokpo, 2017. "Does Chief Executive Officer Succession Affect Firms Financial Performance in Nigeria?," International Journal of Economics and Financial Issues, Econjournals, vol. 7(2), pages 530-535.
    • Handle: RePEc:eco:journ1:2017-02-70
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    References listed on IDEAS

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    1. Benjamin Maury, 2006. "Corporate Performance, Corporate Governance and Top Executive Turnover in Finland," European Financial Management, European Financial Management Association, vol. 12(2), pages 221-248, March.
    2. Denis, David J. & Denis, Diane K. & Sarin, Atulya, 1997. "Ownership structure and top executive turnover," Journal of Financial Economics, Elsevier, vol. 45(2), pages 193-221, August.
    3. Ayse Karaevli, 2007. "Performance consequences of new CEO ‘Outsiderness’: Moderating effects of pre‐ and post‐succession contexts," Strategic Management Journal, Wiley Blackwell, vol. 28(7), pages 681-706, July.
    4. Weisbach, Michael S., 1988. "Outside directors and CEO turnover," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 431-460, January.
    5. Salas, Jesus M., 2010. "Entrenchment, governance, and the stock price reaction to sudden executive deaths," Journal of Banking & Finance, Elsevier, vol. 34(3), pages 656-666, March.
    6. Jong C. Rhim & Joy V. Peluchette & Inam Song, 2006. "Stock Market Reactions and Firm Performance Surrounding CEO Succession: Antecedents of Succession and Successor Origin," American Journal of Business, Emerald Group Publishing, vol. 21(1), pages 21-30.
    7. Rokiah Ishak & Ku Nor Izah Ku Ismail & Shamsul Nahar Abdullah, 2013. "CEO Succession and Firm Performance: Evidence from Publicly Listed Malaysian Firms," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 9(2), pages 29-48.
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    Cited by:

    1. Muna Al Suwaidi & Fauzia Jabeen & Agata Stachowicz-Stanusch & Matthew Webb, 2020. "Determinants Linked to Executive Succession Planning in Public Sector Organizations," Vision, , vol. 24(3), pages 284-299, September.

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    More about this item

    Keywords

    Chief Executive Officer Succession; Financial Performance; Nigerian Stock Exchange; Firms and Competencies;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G1 - Financial Economics - - General Financial Markets

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