Stock Market Reaction to Managerial Change Announcements: Evidence from three Emerging African Stock Exchanges

Abstract

The restructuring of corporate governance at the head of a company is a major strategic signal, the significance of which is closely scrutinized by the financial markets. When a company announces a change in its management team, be it an unexpected departure, an external appointment or an internal reorganization, investors instantly reassess their expectations regarding future performance, perceived risk and the coherence of the strategic vision. The objective of this thesis is to study the behavior of the stock exchange prices when there is a change within the executive leadership of the companies listed on the African emergent stock markets. To reach that aim, we identified the information through the legal advertisement’s newspapers of and the boards of director’s reports. The stock exchange prices was obtained from the individual market database BRVM, NSE and JSE. Each event permit the constitution of a subsample. Through the event study technics, the Student tests (parametric test) and tests of signed level of Wilcoson (nonparametric), the obtained results show that on the NSE the stock price reacted negatively and significantly to the advertisement of the change. However, it arises overall on the JSE for the studied cases, that the investors positively accommodate the advertisement of the modification of the brains trust, considering the positive sign of the abnormal return. On the BRVM, a similar conclusion has been made, in terms of reaction stock price and abnormal return. Generally, considering the main results of this research, one can to conclude that in Sub Saharan markets, the stock price slowly reacts to the advertisement of a change of managers.