A Study On The Market Reaction To The Departure Of Key Executives Of Listed Companies

The departure of senior executives and its influence are important contents of corporate governance research,in which the "personnel earthquake" caused by the departure of key senior executives is widely concerned by investors.The departure of key executives of listed companies,such as Lu Qi,former president of Baidu,Chang Cheng,vice president of Lenovo,and Xie Dongying,chief financial officer of Weilai,not only has a huge impact on the company’s production and operation,but also makes the company’s stock price "dive" in a short period of time,seriously damaging the market value.It is of great theoretical and practical significance to explore the impact of the departure of key executives on investor sentiment in the capital market and the resulting market reaction,so as to further understand the efficiency of China’s capital market and deepen the construction of professional manager market.Based on the clear definition of the key executives of listed companies,this paper first uses the theory of social capital,signal transmission theory and other theories to analyze the market reaction and differences of the key executives of listed companies.According to the analysis,the departure of key executives of listed companies will send a bad signal to the market,and lead to a negative change in the stock price.Secondly,on the basis of theoretical analysis,using the event study method,this paper empirically tests the market reaction of key executives leaving events in China’s A-share market from 2014 to 2018,and draws the conclusion that the key executives leaving events will send negative signals to the market and generate negative market reaction.Furthermore,key executives are divided into two categories: general manager and key subordinate executives,and the departure of key executives in enterprises with different property rights is also considered,the difference of market reaction between the two classifications was studied by multiple statistical regression.The empirical test results show that compared with the departure of the general manager,the departure of key subordinate executives has a stronger negative market response;compared with the departure of key executives in state-owned enterprises,the departure of key executives in non-state-owned enterprises has a stronger negative market response.Moreover,based on the investor sentiment theory,this paper makes a theoretical analysis and empirical test on the internal mechanism of key executives’ leaving market reaction.The research shows that the negative signals of the departure of key executives of listed companies are transmitted to the capital market through the negative emotions of investors,thus generating a negative market reaction.The innovation of this paper lies in:(1)introducing the concept of key subordinate executives in the research,clearly defining the connotation of key executives,providing reference and reference for further research on the characteristics of core members in the senior management team.(2)This paper reveals the market reaction of key executives leaving in a comprehensive and profound way.It not only studies the market reaction of key executives leaving in Listed Companies in general,but also further discusses the market reaction difference caused by the event of leaving from two perspectives: the identity difference of the former executives and the property right nature difference of the sample companies.(3)This paper studies the relationship between investor sentiment and stock price changes before and after the departure event,and reveals the internal mechanism of market reaction caused by the departure of key executives.