When a chief executive officer (CEO) leaves a company, investors want to know why. When a new chief executive officer comes in, they worry about whether that's going to be good or bad for the company's (and their investment's) 澳洲幸运5开奖号码历史查询:bottom line. Good or bad, any type of news generally makes a stock🍒 ✤more volatile in the short term.

That's why some public companies prepare succession plans worthy of a Tudor monarch. If a long-serving CEO is close to 澳洲幸运5开奖号码历史查询:retirement, a new leader will emerge, gradually taking ꩲon a more public role before the ✤boss makes the inevitable announcement. That's if all goes smoothly. A quick departure and the first impressions of investors can have a big impact on the company's share price.

Hasty Departures

It's never pretty when a CEO is ousted by a company's 澳洲幸运5开奖号码历史查询:board of directors. Investors generally jump to the conclusion that the business is doing very badly or is otherwise about to hit the skids. In some cases, they're probably correct. That's why companies generally an♕nounce a replacement choice or an interim choice at the same time as the departur🐻e of the CEO is reported.

The company may try to paper over the firing with nice words, but it cannot lie. If the CEO leaves because the company blew its sales target, because it's about to be hit with lawsuits from all sides for safety violations, or because $1 billion is missing from the accounts, the company must report it promptly to its 澳洲幸运5开奖号码历史查询:shareholders.

In such cases, the company's 澳洲幸运5开奖号码历史查询:stock price will almost certainly tank—at least short term. Lululemon (LULU) shares dropped by 3.5% in after-hours trading when the company's CEO, Laurent Potdevin, resigned in 2018 after he reportedly violated the company's standards of conduct.

First Impressions

The response to a new CEO is strictly based on shareholders' impressions of the new boss. As a rule, a CEO change carries more downside than upside risk. Investors worry that the newcomer will shift corporate strategy for the worse. Some shareholders may have a particular regard for t🌺he leader who just l♓eft.

In any case, they'll worry whether the transition will be smooth or rocky. To some extent, this is a 澳洲幸运5开奖号码历史查询:public relations task. The company will often (and should) focus on the new leader's achievements at another company, past successes🌺 in the industry, or reputation for re-energizing bus♒inesses.

What Investors Look for in a New CEO

Wh🍨ether the new CEO is an insider or an outsider is always a key point. Either way, shareholders are often divided on which is better. Investors tend to be more comfortable with new CEOs who are familiar with industry dynamics and the specific challenges the company m🍰ay face.

Their reputation is also important, particularly as investors assess the CEO’s track record for creating shareholder value. This pedigree could be reflected in different areas, including the ability to grow market share, reduce costs, or expand into new growth market🅘s.

Despite initial investor concerns, there is no clear correlation between how the stock performs on the day the new CEO is announced and how it performs from that point forward.

The Bottom Line

Negative company news tends to push a stock's price down while positive company news has the opposite effect; the news of a change in CEO is no different.

If a change in CEO is handled with care and the replacement is deemed a competent successor, then a company's stock price shouldn't be negatively impacted. Conversely, if the news of a departing CEO or of a new CEO is seen to be mishandled, a company's stock price may drop. Regardless, the handing off of a baton from one CEO to the next does make a stock more volatile.