The Wealth Effects of CFO Turnover: Evidence from Post-Sarbanes-Oxley Act

Abstract

This study investigates the impact of CFO turnover on shareholder wealth in the post-Sarbanes-Oxley Act period. Our tests are based on a sample of 244 CFO turnovers during the post-SOX (2003-2007) years. Our full and sub-sample empirical results show that market reaction to CFO turnover events was significantly negative for all departure reasons. Prior Pre-SOX research showed no significant market reaction around most CFO departure events with the exception of a sudden CFO departure event. Thus, our results indicate that SOX has influenced market participants’ perception of CFO turnover event as value relevant. We provide evidence that supports existing literature that CFO turnover is disciplinary in nature.