IDEAS home Printed from https://ideas.repec.org/a/vrs/ceuecj/v10y2023i57p50-71n3.html
   My bibliography  Save this article

What Drives Shareholders' Reaction To CEO Turnovers, Dividend Changes, and Block Trades? A Theoretical Background

Author

Listed:
  • Preś-Perepeczo Agnieszka

    (Institute of Economics and Finance, University of Szczecin, Mickiewicza 64, 71-101 Szczecin, Poland)

Abstract

This study presents a review of theoretical concepts described in the literature that explain how corporate events might be perceived by investors. The theoretical discussion in this paper is related to three corporate events: CEO turnovers, dividend payouts, and block trades. The objective of this analysis is to identify and systemise the theoretical background for the drivers of shareholders' responses to these three corporate decisions. In other words, I will provide answers to the following questions: why is the market reaction sometimes positive and other times negative, and why is it sometimes stronger and other times weaker? Based on the literature review, I will show that each of the analysed corporate events might be perceived by shareholders as either positive or negative signals concerning perspectives and future cash flows. Consequently, corporate events might drive share prices up or down. However, shareholder reaction to one type of the event, such as CEO turnovers, will not always be homogeneous – only positive or negative. The strength of this reaction may also vary. The main reasons for these variations are the effectiveness of corporate governance mechanisms, investors' perceptions of the event, the event's peculiarities, and the company's characteristics, as well as other relevant circumstances and factors.

Suggested Citation

  • Preś-Perepeczo Agnieszka, 2023. "What Drives Shareholders' Reaction To CEO Turnovers, Dividend Changes, and Block Trades? A Theoretical Background," Central European Economic Journal, Sciendo, vol. 10(57), pages 50-71, January.
    • Handle: RePEc:vrs:ceuecj:v:10:y:2023:i:57:p:50-71:n:3
    DOI: 10.2478/ceej-2023-0004
    as

    Download full text from publisher

    File URL: https://doi.org/10.2478/ceej-2023-0004
    Download Restriction: no
    File URL: https://libkey.io/10.2478/ceej-2023-0004?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Adams, John C. & Mansi, Sattar A., 2009. "CEO turnover and bondholder wealth," Journal of Banking & Finance, Elsevier, vol. 33(3), pages 522-533, March.
    2. M. J. Gordon, 1963. "Optimal Investment And Financing Policy," Journal of Finance, American Finance Association, vol. 18(2), pages 264-272, May.
    3. repec:bla:jfinan:v:59:y:2004:i:2:p:537-600 is not listed on IDEAS
    4. Banerjee, Suman & Gatchev, Vladimir A. & Spindt, Paul A., 2007. "Stock Market Liquidity and Firm Dividend Policy," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 42(2), pages 369-397, June.
    5. repec:bla:jfinan:v:59:y:2004:i:3:p:1125-1165 is not listed on IDEAS
    6. Watts, Ross, 1973. "The Information Content of Dividends," The Journal of Business, University of Chicago Press, vol. 46(2), pages 191-211, April.
    7. Litzenberger, Robert H. & Ramaswamy, Krishna, 1979. "The effect of personal taxes and dividends on capital asset prices : Theory and empirical evidence," Journal of Financial Economics, Elsevier, vol. 7(2), pages 163-195, June.
    8. Stijn Claessens & Simeon Djankov & Joseph P. H. Fan & Larry H. P. Lang, 2002. "Disentangling the Incentive and Entrenchment Effects of Large Shareholdings," Journal of Finance, American Finance Association, vol. 57(6), pages 2741-2771, December.
    9. Niederhoffer, Victor, 1971. "The Analysis of World Events and Stock Prices," The Journal of Business, University of Chicago Press, vol. 44(2), pages 193-219, April.
    10. repec:bla:jfinan:v:43:y:1988:i:1:p:83-95 is not listed on IDEAS
    11. Pessarossi, Pierre & Weill, Laurent, 2013. "Does CEO turnover matter in China? Evidence from the stock market," Journal of Economics and Business, Elsevier, vol. 70(C), pages 27-42.
    12. Kraus, Alan & Stoll, Hans R, 1972. "Price Impacts of Block Trading on the New York Stock Exchange," Journal of Finance, American Finance Association, vol. 27(3), pages 569-588, June.
    13. Jiang, Fuxiu & Ma, Yunbiao & Shi, Beibei, 2017. "Stock liquidity and dividend payouts," Journal of Corporate Finance, Elsevier, vol. 42(C), pages 295-314.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Khelifa Mazouz & Yuliang Wu & Rabab Ebrahim & Abhijit Sharma, 2023. "Dividend policy, systematic liquidity risk, and the cost of equity capital," Review of Quantitative Finance and Accounting, Springer, vol. 60(3), pages 839-876, April.
    2. Al-Yahyaee, Khamis H. & Pham, Toan M. & Walter, Terry S., 2011. "The information content of cash dividend announcements in a unique environment," Journal of Banking & Finance, Elsevier, vol. 35(3), pages 606-612, March.
    3. Imran, Kashif & Usman, Muhammad & Nishat, Muhammad, 2013. "Banks dividend policy: Evidence from Pakistan," Economic Modelling, Elsevier, vol. 32(C), pages 88-90.
    4. Gniadkowska-Szymańska Agata, 2017. "Impact of a Company’s Dividend Policy on the Liquidity of Shares Listed on the Warsaw Stock Exchange," Financial Internet Quarterly (formerly e-Finanse), Sciendo, vol. 13(3), pages 24-32, September.
    5. Darakhshan Younis & Attiya Yasmin Javid, 2014. "Market Imperfections and Dividend Policy Decisions of Manufacturing Sector of Pakistan," PIDE-Working Papers 2014:99, Pakistan Institute of Development Economics.
    6. Liang, Shangkun & Niu, Yuhao & Yang, Dan & Liu, Xuejuan, 2023. "Dividend payouts under a societal crisis: Financial constraints or signaling?," International Review of Financial Analysis, Elsevier, vol. 88(C).
    7. Sereeparp Anantavrasilp & Abe de Jong & Douglas V. DeJong & Ulrich Hege, 2020. "Blockholder leverage and payout policy: Evidence from French holding companies," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 47(1-2), pages 253-292, January.
    8. Armanious, Amir & Zhao, Ruoyun, 2024. "Stock liquidity effect on leverage: The role of debt security, financial constraint, and risk around the global financial crisis and Covid-19 pandemic," International Review of Financial Analysis, Elsevier, vol. 92(C).
    9. Jiang, Fuxiu & Ma, Yunbiao & Shi, Beibei, 2017. "Stock liquidity and dividend payouts," Journal of Corporate Finance, Elsevier, vol. 42(C), pages 295-314.
    10. Kashif Imran, 2011. "Determinants of Dividend Payout Policy: A Case of Pakistan Engineering Sector," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 14(41), pages 47-60, September.
    11. Michaely, Roni & Qian, Meijun, 2022. "Does stock market liquidity affect dividends?," Pacific-Basin Finance Journal, Elsevier, vol. 74(C).
    12. Chen, Fan, 2016. "The wealth effects of dividend announcements on bondholders: New evidence from the over-the-counter market," Journal of Economics and Business, Elsevier, vol. 86(C), pages 52-75.
    13. Yung, Kenneth & Jian, Yi, 2017. "Effects of the shareholder base on firm behavior and firm value in China," International Review of Economics & Finance, Elsevier, vol. 49(C), pages 370-385.
    14. Khan, Naimat U. & Shah Jehan, Qurat Ul Ain & Shah, Attaullah, 2017. "Impact of taxation on dividend policy: Evidence from Pakistan," Research in International Business and Finance, Elsevier, vol. 42(C), pages 365-375.
    15. Mao Liang Li & Chin Man Chui & Chang Qing Li, 2014. "Dividend, liquidity and firm valuation: evidence from China AB share markets," Applied Financial Economics, Taylor & Francis Journals, vol. 24(9), pages 587-603, May.
    16. Gu, Lifeng & Wang, Yixin & Yao, Wentao & Zhang, Yilin, 2018. "Stock liquidity and corporate diversification: Evidence from China’s split share structure reform," Journal of Empirical Finance, Elsevier, vol. 49(C), pages 57-80.
    17. Li, Wanli & Zhou, Jingting & Yan, Ziqiao & Zhang, He, 2020. "Controlling shareholder share pledging and firm cash dividends," Emerging Markets Review, Elsevier, vol. 42(C).
    18. Stereńczak, Szymon & Kubiak, Jarosław, 2022. "Dividend policy and stock liquidity: Lessons from Central and Eastern Europe," Research in International Business and Finance, Elsevier, vol. 62(C).
    19. Chen, Zilin & Gao, Kang & Huang, Weiwei, 2020. "Stock liquidity and excess leverage," Finance Research Letters, Elsevier, vol. 32(C).
    20. Alhassan, Abdulrahman & Naka, Atsuyuki, 2020. "Corporate future investments and stock liquidity: Evidence from emerging markets," International Review of Economics & Finance, Elsevier, vol. 65(C), pages 69-83.

    More about this item

    Keywords

    CEO turnovers; dividend changes; block trades; market reaction; theoretical concepts;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G3 - Financial Economics - - Corporate Finance and Governance
    • M5 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:vrs:ceuecj:v:10:y:2023:i:57:p:50-71:n:3. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.sciendo.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.