Financial distress and its effect on stock performance moderated by CEO ownership and CEO tenure
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2025-07-07
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en
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This research investigates how CEO characteristics impact reactions of the stock market in times of a profit warning issuance. Where existing literature extensively researched the influence of firm financials on performance, the knowledge about signals perceived by investors from CEO characteristics and stock market performance during financial distress remain limited.
The study analyzes publicly listed firms that issued a profit warning between 1-1-2021 and 31-12-2024. This excludes the corona-crisis and comes down to an N of 111. Cumulative Abnormal Return represents stock performance, CEO ownership and CEO tenure within the specific firm were used as moderators. Firm size, firm age, industry, CEO gender, and CEO duality were added to the model in order to conduct a multiple linear regression analysis. In order to process the data better, some variables have undergone a log-transformation. To prevent data loss within the limited sample, the CEO ownership variable is converted to a binary indicator through dummy coding.
The results show a portion of variance explained by CEO and firm characteristics. CEO tenure within a company positively affects CAR. CEO ownership showed no significant impact on CAR.
These results contribute to literature about executives and their role in times of financial distress. Moreover, these findings may be useful for executives, investors, and boards to better grasp how firm leadership impacts market reactions. Suggestions for future research entail a larger and more diversified sample and the addition of more granular data on CEO ownership in order to possibly find more significant impact and to be able to create more generalizability.
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Faculteit der Managementwetenschappen