CEO-changes on the Stockholm Stock Exchange : An event study of the market’s reaction

The purpose of the study is to empirically examine if there is any abnormal reaction from the stockholders on the Stockholm Stock Exchange and what could explain the reaction associated with a CEO-change. To be able to examine the subject, we chose to do research on whether the returns on a company’s stocks changes by calculating the actual returns and comparing these to the expected returns in a market model, which has been used frequently in previous and similar research. Through measures of return such as abnormal returns, average abnormal returns and cumulative average abnormal returns we examine if there are any significant reactions on the stock market by isolating the event of a CEO-change within chosen estimation and event-windows. To ensure that the study is relevant and credible, we chose to apply an event study which has been used in earlier studies and research. We have included 130 CEO-changes on the Stockholm Stock Exchange during the period 2000-2019 and have through the above-mentioned measurements of return examined how the market reacts to a CEO-change. To further try to explain what affects the reaction, a regression-analysis was conducted with numerous independent variables and the cumulative abnormal returns as the dependent variable. The empirical research has been put into relation to well-known theories and previous studies about CEO-changes for interpretation and analysis. The result indicates that no significant reactions have occurred on the Stockholm Stock Exchange associated with a CEO-change. However, the regressionanalysis shows some significant values on a few of the examined independent variables such as presentation of a new obligatory CEO, the company’s historical stock-returns and how long the CEO has held his position as the CEO. The conclusion of the study, which answers our main problem, is that there is no significant reaction on the Stockholm Stock Exchange associated with a CEO-change