Top management change effect firm performance and trading volume evidence from Thailand (1999-2014)

Abstract

This paper examines the relationship between the change of top managers and the firm’s stock return performance for listed firms in the Stock Exchange of Thailand (SET) by event study method. Besides investigating the change of top managers’ effect, this paper also examines the effect between the change and the characteristics of each top manager to firm accounting performances by univariate and regression method. Characteristics of top managers include age, gender, educational background, educational level, tenure, work experience, CEO duality, nationality, ownership and insider replacement. Return on Assets and Return on Equity and Tobin’s Q are used as proxies for accounting performances. Total sample of 1,268 events during the year 1999 to 2014 for this study are manually collected through SETSMART database excluding the events with change of the top managers only by the positions. The result shows that when the new top managers enter the company, the firms’ return increases especially in the long run. Surprisingly, the existing top managers are unlikely to resign because of the poor stock performance. Individual investors see the change of top management as good news, while foreign investors and institutions perceive the event as negative trend. Education (Bachelor’s degree and below), and nationality of managers are significantly to firm accounting’s performance. This paper would be beneficial to the company on recruitment for the top executive position, and also to the investors’ awareness on impact of the change of top managers to the stock price.