Abstract: With the set-up of GEM market in China, there emerges an interesting phenomenon that many executives of listed companies voluntarily resign in less than one year after IPO. Employing all executives as sample and differentiating voluntary and involuntary resignations, the authors investigate the determinant and wealth effect of executives’ voluntary resignation. They find that the market value of executives’ ownership has an important effect on voluntary resignation. The higher the market value of their shares, the more likely their voluntary resignations happen. Furthermore, such impact is more pronounced when the firm performance is bad, and the executives of firms with lower earnings are more likely to resign when the market values of their holdings are higher. Finally, the paper examines the cumulative stock return around executives’ resignation. It is shown that the market has a negative response to executives’ voluntary resignation, but executives’ involuntary resignation doesn’t have any influence in stock price.
Keywords: Voluntary Resignation, Market Value of Shares, Firm Performance, Market Response
source:Finance & Trade Economics ,No.1,2013