The Impact of CEO Turnover on Financial Performance of Industrial
Firms Listed on the Amman Stock Exchange
AHMAD YOUSEF KALBOUNEH1*, LOONA SHAHIN1, KASEM ALDABBAS1,
KHALED ABURISHEH2
1Accounting Department, Business School,
Al-Balqa Applied University,
As-Salt,
JORDAN
2Department of Accounting and Accounting Information System, Amman University College,
Al-Balqa Applied University
*Corresponding Author
Abstract: - The present study endeavors to examine the correlation between CEO turnover and the financial
performance of industrial firms in Jordan. The primary objective of this research is to assess how changes in the
Chief Executive Officer (CEO) position affect the financial performance of an organization. This investigation
encompasses three specific aspects by analyzing the timing of CEO turnover events in relation to key financial
performance (FP) indicators, namely Return on Assets (ROA) and Return on Equity (ROE). Utilizing financial
data collected from 33 firms between 2017 and 2021, a panel data regression analysis was conducted to reach
meaningful conclusions. The results indicate a negative relationship between CEO turnover and FP, regardless
of the timing of CEO dismissal, which highlights the low tolerance for poor performance in industrial firms in
Jordan. Furthermore, the study found that ROE serves as a more accurate predictor of CEO turnover compared
to ROA. Based on these findings, the study formulates several conclusions and recommendations, as well as
potential directions for future research.
Key-Words: -CEO Turnover, CEO Tenure, Financial Performance, Industrial Sector
Received: March 9, 2023. Revised: September 10, 2023. Accepted: September 15, 2023. Published: September 29, 2023.
1 Introduction
The business environment has recently undergone
significant changes, with the establishment of many
large firms and the emergence of complex
commercial transactions, [1]. In response to this,
accounting standards have been evolving to include
more detailed interpretations, alternatives, and
methods that can be applied in a cohesive manner.
Top management, responsible for implementing
the firm's vision through administrative and
financial decisions, is tasked with accurately and
consistently reporting their financial information in
accordance with international standards, [2]. During
their first period of work, executive managers are
often eager to prove themselves and may, therefore,
resort to making high-risk financial decisions in
order to achieve large financial gains, [3]. In the last
year of their term, CEOs may also resort to making
high-risk decisions in order to solve financial
problems encountered during their period of work,
as well as to demonstrate high financial profits in
order to gain better job opportunities, benefits, and
higher wages, [4].
The FP of firms is a crucial indicator for
assessing the health of local economic systems (add
reference). Therefore, it is imperative for
researchers and policymakers to continuously
evaluate the performance of firms and their ability
to meet their goals and objectives, [1]. As a result,
the performance and decisions of a firm's board of
directors are often closely examined as they can
provide insight into the firm's future performance.
However, many factors can influence this
relationship and make accurate predictions
challenging. In other words, a firm may have strong
FP but still have poor management practices, [5].
Thus, The CEO position has gained increasing
significance as they hold the highest level of
authority within a firm and are responsible for
overseeing financial and administrative matters.
This present study seeks to examine the influence of
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Ahmad Yousef Kalbouneh, Loona Shahin,
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E-ISSN: 2224-2899
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the CEO’s role on the FP of industrial firms listed in
the Amman Stock Exchange. The focus is to
investigate how the CEO's actions and decisions
impact the financial outcomes of these firms. To the
authors’ knowledge, the topic is rarely discussed in
the Jordanian context and the outcomes are expected
to be benefited legislators and decision-makers. The
study examined the effect of the CEO's
characteristics, particularly their decision to spin off
certain assets, on the firm's FP as reflected in the
balance sheets. The CEO's actions have a notable
impact on the firm's business environment, and this
study aims to provide insight into how these
decisions shape the firm. Accordingly, this study
aimed to investigate the impact of a new CEO's
appointment on the FP of firms within their first
year of service, as well as the effect on the final year
of the CEO's tenure. Financial data from the
previous three years were studied to compare the
changes in performance during the first year of the
CEO's service to the performance of the firm in the
final year of the CEO's tenure. The results of this
study showed the potential effect of a new CEO's
appointment on the FP of a firm.
The following is how the rest of the study is
organized: first, the literature review and hypothesis
generation section provides context and sets the
groundwork. Then, the methodology section
explains the approach used in conducting the study.
The data analysis section analyzes the data
collected, and finally, the findings are discussed and
conclusions are drawn in the last section.
2 Literature Review
2.1 The CEO's Roles and Responsibilities
The role of the Chief Executive Officer (CEO)
within a firm is considered to be of paramount
importance. CEOs hold the highest level of
executive authority. They are responsible for the
planning, coordination, and control of all aspects of
the firm's internal management. This includes
making decisions that have a direct impact on the
firm's success or failure. In the study, [6], the
authors posit that the CEO's tenure and replacement
can have a significant impact on the firm and its
board of directors.
The CEO's responsibilities are an integral aspect
of corporate governance and can affect the firm's
investment decisions, business performance, and
market position. In the study, [7], the authors assert
that the role of the CEO and the appointment of a
new one can greatly influence the firm's business
activities and strategic decisions.
One of the primary responsibilities of the CEO
is the planning and implementation of strategies to
secure the best funding sources. The study, [8],
argues that identifying resource requirements,
researching funding options, allocating firm
resources, and maximizing returns on investments in
order to maintain the firm's competitive position and
drive growth are essential tasks for the CEO.
Furthermore, the CEO is responsible for leading,
guiding, and evaluating the performance of other
executives, overseeing the firm's operations, and
evaluating its success. The CEO also plays a key
role in representing the firm to both internal and
external stakeholders.
Another significant aspect of the CEO's role is
building a corporate culture that aligns with the
firm's values, beliefs, and mission. This includes
guiding and unifying the vision and behavior of
employees to ensure that the firm's strategy and
decision-making process are aligned. In addition,
the CEO is responsible for making important
decisions and has a comprehensive understanding of
the firm's environment, strengths, weaknesses, and
financial and strategic performance, [9]. They are
responsible for developing the firm's strategy for
both short and long-term goals and making
decisions related to investments.
2.2 CEO Turnover
The entry and exit of a CEO from their position are
influenced by various factors, commonly referred to
as pull and push factors. Pull factors refer to the
reasons that lead to the request for resignation, such
as the CEO's experiences and knowledge, skills, and
abilities that make them attractive to other firms in
the same industry, [10]. On the other hand, push
factors refer to situations that result in leaving the
job for reasons that are not significantly related to
the core work, such as poor performance,
dissatisfaction, and/or incompatibility with the
firm's culture, [11].
The CEO turnover is also influenced by other
factors. For example, if the CEO's level of
competence drops, an urge for a change may arise to
improve the firm's performance, particularly FP,
[12]. Thus, the newly appointed CEO will face
significant pressure to boost performance and meet
the expectations of shareholders, [13].
The performance of a new CEO can be
measured by studying accounting indicators that
reflect the effectiveness of operational performance
within the organization. FP can also be measured
through market indices and stock prices. The study,
[14], found that the process of changing a CEO,
when it occurs voluntarily and infrequently, leads to
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negative FP results for the subsequent manager. The
same researcher found that operational indicators, as
expressed in accounting, have a higher correlation
than other indicators, such as share price, which are
not typically affected by changes in the executive
director. In the case of a short-term change in the
executive director, the researcher found that it did
not affect the FP of banks, whether at the level of
financial or market indicators, [15], [16], [17].
The study, [18], argues that the weakness of the
legislative and legal system in developing countries,
associated with weakness in governance systems
and the absence of development in information
systems, leads to a fundamental difference in the
factors for measuring the performance of new CEOs
in developing countries compared to developed
countries. This conclusion is supported by, [19],
which found differences in the performance of new
CEOs operating in different business environments
and markets.
Many previous studies have also dealt with
various themes that confirm the process of change.
For example, the change may be pre-planned or
sudden, and previous studies have agreed that
unplanned change has dire consequences for the FP
of organizations, [4], [20]. Additionally, the results
of appointing the CEO internally or attracting him
externally were inconsistent with the FP of
institutions. Where the CEO coming from outside
the organization carries new approaches and
strategies and is outside the framework of internal
disputes in the organization which encourages his
acceptance. On the hand, the CEO who is appointed
internally has a deep understanding of the
operational processes, existing weaknesses, and
decision-making structures in the organization, [21],
[22], [23], [24]. Hence, the external selection of the
CEO may lead to a difference in FP from the
promotion of the CEO internally, [14].
In addition, the presence of families on the
board of directors also affects the performance of
the appointed CEO, [25]. The gender of the CEO
also plays a role and is reflected in performance and
motivation for hiring, [26]. The study, [27],
indicated in their theoretical study that the effect of
appointing a financial manager on FP is not clear
due to the multiplicity of factors that are taken into
account when measuring this relationship, but it can
be inferred through appointment criteria, education,
and experience on this relationship in general. The
study, [28], found that the relationship between
hiring a CEO and performance takes the form of an
inverted “U”, which indicates a momentary rise in
performance followed by a decline in the medium
term and then gradually rises again.
2.3 CEOs' Duration and Financial
Performance
Measuring FP is an important tool to assess the
CEO's ability to manage the firm's resources and
make decisions that align with the firm's goals. The
members of the firm's board of directors have a role
to play in monitoring the CEO's performance and
may advise or even dismiss the executive director if
necessary, [29].
The decision to rotate or dismiss a CEO is a
significant one, and this is why many studies have
been conducted to examine the impact of CEO
turnover on corporate FP. These studies focus on
analyzing the impact in the first year of the CEO's
appointment, during the first period, and in the last
year of their tenure.
The study, [30], analysed the impact of CEO
characteristics on firms, reputation, and FP, as well
as sustainable corporate growth in India. Their
results showed that CEO turnover is associated with
FP and sustainable corporate growth. Similarly,
[31], found that low FP significantly increases CEO
turnover.
These studies among others, have suggested that
long-term CEOs must be able to prove themselves at
all times and that their performance has a significant
influence on the firm's FP and share price. The
dismissal of a CEO with poor performance is
considered imperative to improve the FP of the firm,
[32]. The study, [33], aimed to measure the
likelihood of dismissal of the CEO in the event of
poor FP, even if the cause of poor FP is beyond the
control of the CEO. The results showed that the
dismissal rate significantly increases after poor FP,
regardless of the reasons.
Another stream of research showed a different
trend. For example, [34], examined the impact of
CEO characteristics (such as the CEO's duality,
nationality, board membership, and turnover) on the
firm's profits. The results of the study showed no
influence of the CEO or CEO turnover on the firm's
FP. In addition, [35], revealed that the impact of
CEOs during their first years of service was not
found to have an effect on firm profits and FP.
In fact, the latter stream support prior claims
that CEO turnover has multifaceted factors that
initiate the change. The study, [36], showed that the
main reason for the CEO's dismissal was the
mismanagement of the firm and the exploitation of
its resources. Similarly, [37], found that the rotation
of a CEO is often the result of poor performance,
even if the cause is outside their control, indicating
that the responsibility for improved FP falls on the
CEO. A study by, [33], found the same conclusion,
that a CEO will be rotated or dismissed if the firm's
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share price deteriorates, regardless of the reasons for
the poor performance.
In summary, measuring FP is an important tool
to assess the CEO's ability to manage the firm's
resources and make decisions that align with the
firm's goals. The decision to rotate or dismiss a CEO
is a significant one, and many studies have been
conducted to examine the impact of CEO turnover
on corporate FP. These studies have found that CEO
turnover is associated with FP and that long-term
CEOs must be able to prove themselves at all times
and that their performance has a significant
influence on the firm's FP and share price. However,
other studies have found no influence of the CEO or
CEO turnover on the firm's FP. Research also
suggests that CEO turnover has multifaceted factors
that initiate the change, such as poor performance,
mismanagement of the firm, and the exploitation of
its resources.
Few Arab region studies had examined the
impact of CEO turnover on FP. The study, [38],
examined the impact of CEO influence on a firm's
FP from the perspective of accounting profit, using
FP metrics such as return on assets, royalties, and
stock profitability, and tested on firms listed on the
Egyptian Stock Exchange. Similarly, a study by,
[39], examined the characteristics of the board of
directors and their impact on FP in an organization,
testing the impact of board characteristics such as
size, independence, number of meetings, and
duplication of the executive director's doctrine on
FP. These studies are similar to the current study in
some aspects but differ in sample, methodology, and
community of study, as they address the Jordanian
business environment while other studies have
addressed the environments of other societies in
different settings.
In summary, the topic of CEO performance has
been a contentious issue in accounting literature.
Several theories suggest the nature of the
relationship between CEO turnover and
performance. The agency theory and stewardship
theory were mostly used as they suggest a positive
correlation between CEO turnover and a firm’s
performance. Other less adopted theories such as
Upper Echelons theory, Resource Dependence
theory, and Tournament theory were also expected
to provide similar results under specific construct.
However, prior studies, which closely examined the
correlation between changes in CEO leadership and
firm performance, have not shown a clear
consensus. Moreover, there is limited research on
how CEO performance evolves over time, as much
of the prior literature has only examined
performance at a single point in time. Therefore, to
expand on this topic, we propose the following
hypothesis:
H01: There is no statistically significant impact of
CEO turnover in the first year of appointment on the
financial performance of industrial firms listed on
the Amman Stock Exchange.
H02: There is no statistically significant impact of
CEO turnover during the middle period of service
on the financial performance of industrial firms
listed on the Amman Stock Exchange.
H03: There is no statistically significant impact of
CEO turnover in the final year of service on the
financial performance of industrial firms listed on
the Amman Stock Exchange.
3 Research Methodology
The current study investigates the relationship
between CEO turnover and firms' FP. The proxies
utilized to gauge an FP in this study are ROA and
ROE. In addition, CEO who were dismissed in their
first year, during their 4 years tenure, and at the end
of their terms represent the independent variables.
The study also controls the firm’s size and financial
leverage in the statistical model. Data were
extracted from public annual reports announced
from Amman Stock Exchange for the years 2017-
2021 and (33) firms were included. The study
conducted the fixed and random panel data
regression to test the study’s hypotheses and the
favored models were chosen based on the Hausman
test.
4 Data Analysis
Table 1. Descriptive Statistics
Variable
Obs
Mean
Min
Max
ROA
165
.007
-.252
.072
ROE
165
.017
-.492
.299
LEV
165
.623
.261
.948
Size
165
17.228
15.89
18.584
First
165
.545
0
1
Middle
165
.461
0
1
End
165
.467
0
1
Table 1 shows that the mean for the dependent
variables ROA, and ROE are 0.007 and 0.017
respectively. The standard deviation and ranges for
both variables suggests that the majority of the
observations fall within a relatively narrow range
around the mean, with relatively few observations at
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the extremes. In addtion, the mean for the control
variables LEV and size are 0.623 and 17.228
respectively. The standard deviation and ranges
suggest that observations fall within a relatively
narrow range around the mean. Finally, the mean of
change, change1, and change2 are all approximately
0.5, with a standard deviation of approximately 0.5,
and a range of 0 to 1. This suggests that the majority
of the observations for these variables are evenly
distributed around the mean, with relatively few
observations at the extremes.
Table 2. Pairwise correlations
Variab
les
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(1)
ROA
1.00
0
(2)
ROE
0.92
7*
1.00
0
(3)
LEV
-
0.23
8*
-
0.21
9*
1.00
0
(4)
size
0.35
0*
0.35
5*
-
0.22
2*
1.0
00
(5)
First
-
0.05
6*
-
0.05
8*
0.00
7
0.0
91
1.00
0
(6)
middle
-
0.00
3*
-
0.03
1*
0.08
1
0.0
67
0.03
8
1.0
00
(7)
end
-
0.05
0
-
0.05
4*
0.05
1
-
0.1
14
0.14
6*
-
0.0
11
1.0
00
*** p<0.01, ** p<0.05, * p<0.1
Table 2 presents the Pairwise correlations
coefficient which ranges from -1 to 1. The results
confirm the naturally strong positive correlation
between ROA and ROE (0.927). In addition, LEV
and size have a weak negative correlation (-0.222).
The explanatory variables (change, change1, and
change2) all have a weak positive correlation with
ROA and ROE and a weak negative correlation with
LEV. In general, there is an absence of a strong
correlation between the study’s independent
variables which allows us to conclude the absence
of multicollinearity.
Table 3. Variance inflation factor
VIF
1/VIF
size
1.251
.799
ROE
1.181
.847
LEV
1.088
.919
ROA
1.041
.961
Middle
1.04
.961
First
1.037
.964
end
1.018
.983
Mean VIF
1.094
.
In Table 3, the Variance Inflation Factor (VIF)
values for all variables are observed to be below
1.251. Additionally, the reciprocal of the VIF
values, denoted as 1/VIF, surpasses 0.799 for all
variables. These findings collectively suggest the
absence of significant multicollinearity issues
among the independent variables. Furthermore, the
average VIF value of 1.094 indicates a low degree
of correlation between the independent variables,
allowing us to conclude that the model is not
afflicted by severe multicollinearity.
Table 4. Unit root test
Variable
Obs
Fisher
LLC
HT
Size
165
146.154***
-
6.3627***
-2.1021*
ROE
165
112.785***
-2.1147**
-
6.1045***
LEV
165
153.168***
-
9.6884***
-
8.4203***
ROA
165
144.470***
-
8.3650***
-
3.0253***
Note: ***, **, and * indicates significance at 1%, 5%,
and 10% level of significance based on t-statistics
Table 4 shows the results of three unit root tests
namely, Fisher, LLC, and HT. The test statistics are
compared to critical values from the appropriate
distribution to determine whether the variable is
stationary or non-stationary. The results of the unit
root test indicate that all variables are stationary, as
all p-values are less than the conventional
significance level of 0.1. The significance level of
the test statistic at 1%, 5%, and 10% level of
significance based on t-statistics which confirms the
stationarity of the variables.
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5 Results
Table 5. Fixed effect panel regression for the
relationship between CEO turnover and ROE
ROE
Coef
.
St.Er
r.
t-
valu
e
p-
valu
e
[95
%
Conf
Interva
l]
Si
g
Middle
-.031
.088
0.35
0.03
-
.142
.205
**
*
SIZE
.064
.133
0.48
0.03
2
.329
.200
**
*
LEV
-.032
.093
1.36
0.07
1
-
.018
.012
**
Consta
nt
-.421
.118
-
3.55
0
-
.653
-.188
**
*
Mean
dependent
var
0.018
SD
dependent
var
0.040
Overall r-
squared
0.539
Number of
obs
165
Chi-square
283.564
Prob > chi2
0.000
R-squared
within
0.526
R-squared
between
0.588
ROE
Coef
.
St.Er
r.
t-
valu
e
p-
valu
e
[95
%
Conf
Interva
l]
Si
g
First
-.112
.088
0.35
0.00
0
-
.053
.278
**
*
SIZE
0.08
6
. 146
0.48
0.02
7
-
.820
2.85
**
LEV
-.015
. 194
1.36
0.05
1
-
.350
.176
*
Consta
nt
-.421
.281
-
3.55
0
-
2.83
2.19
**
*
Mean
dependent
var
0.018
SD
dependent
var
0.228
Overall r-
squared
0.572
Number of
obs
165
Chi-square
41.815
Prob > chi2
0.000
R-squared
within
0.572
R-squared
between
0.518
ROE
Coef
.
St.Er
r.
t-
valu
e
p-
valu
e
[95
%
Conf
Interva
l]
Si
g
End
-
.015
1
.002
0.35
0.05
5
-
.178
.147
**
SIZE
.064
134
-
0.49
0.02
7
-
.131
.200
**
LEV
-.065
.034
1.08
0.08
-
.141
.854
*
Consta
nt
-.339
.303
0.58
0.06
2
-
.217
.895
**
Mean
dependent
var
.2116
SD
dependent
var
0.228
Overall r-
squared
0.5004
Number of
obs
165
Chi-square
41.08
Prob > chi2
0.0002
R-squared
within
0.5123
R-squared
between
0.5093
*** p<.01, ** p<.05, * p<.1
Table 5 reports the findings of a fixed effects
panel data analysis, where the response variable is
"ROE" and the explanatory variables are "change 1,
change2 and change 3” which indicates different
scenarios of the CEO change. In addition, the
controlled variables are leverage and the firm’s size.
The models include a fixed effect for each group,
with a total of 33 groups in the dataset. The overall
goodness of fit for the model is moderate, as
evidenced by the relatively high R-squared value of
0.52, 0.57, and 51 respectively. Both the within and
between R-squared values also suggest that the
model exhibits a good fit for the data. Moreover, the
statistical significance for the models is confirmed
by the F-statistic which implies that the model is
statistically significant at the conventional alpha
level of 0.05.
All of the coefficients in the three models are
statistically significant for the explanatory variables,
as indicated by the probability values in the "P>|t|"
column. The confidence intervals for the
coefficients do not include 0, which further supports
the statistical significance of the coefficients. The
weak negative correlation between the residuals and
the predicted values of the response variable, as
measured by "corr(u_i, Xb)", suggests that the
model specification may not be fully adequate.
Nonetheless, the F-test for the null hypothesis of
equal group-level residuals indicates that the group-
level residuals are significantly different from 0. In
summary, the three fixed effects panel data models
appear to be a good fit.
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Table 6. Fixed effect panel regression for the
relationship between CEO turnover and ROA
ROA
Coef
.
St.Er
r.
t-
valu
e
p-
valu
e
[95
%
Conf
Interva
l]
Si
g
Middle
-
0.04
4
0.02
3
-
1.87
0.06
4
-0.09
0.003
*
SIZE
-
0.61
8
0.25
9
-
2.39
0.10
8
-
0.10
6
1.103
**
LEV
0.03
2
0.03
7
0.86
0.39
-
0.10
5
0.041
Consta
nt
1.06
0.63
6
1.67
0.09
8
-1.99
2.319
*
Mean
dependent
var
0.602
SD dependent
var
0.184
Overall r-
squared
0.579
Number of obs
165
Chi-square
270.564
Prob > chi2
0.000
R-squared
within
0.576
R-squared
between
0.598
ROA
Coef
.
St.Er
r.
t-
valu
e
p-
valu
e
[95
%
Conf
Interva
l]
Si
g
First
-.003
.025
-
0.13
.094
-.046
0.52
*
SIZE
-.625
.264
-
2.37
.019
0.10
4
1.147
**
LEV
.039
.038
1.03
.307
-.113
0.036
Consta
nt
1.16
4
.646
1.80
.074
-.113
2.442
*
Mean
dependent
var
0.602
SD dependent
var
0.184
Overall r-
squared
0.540
Number of obs
165
Chi-square
41.815
Prob > chi2
0.000
R-squared
within
0.542
R-squared
between
0.558
ROA
Coef
.
St.Er
r.
t-
valu
e
p-
valu
e
[95
%
Conf
Interva
l]
Si
g
End
-.047
.023
-
2.06
.041
-.092
-.002
**
SIZE
-.623
.258
2.41
.017
.112
1.134
**
LEV
.029
.037
0.77
.441
-.102
.045
Consta
nt
1.01
3
.636
1.59
.114
-.246
2.272
Mean
dependent
var
.2116
SD dependent
var
0.228
Overall r-
squared
0.480
Number of obs
165
Chi-square
41.08
Prob > chi2
0.0002
R-squared
within
0.472
R-squared
between
0.5093
*** p<.01, ** p<.05, * p<.1
Similar to the prior models, Table 6 examines
the relationship between the response variable,
Return on Assets (ROA), and the explanatory
variables, change 1, change 2, and change 3, which
represent different scenarios of the CEO change.
Additionally, leverage and firm size are included as
controlled variables. The models include a fixed
effect for each of the 33 groups in the dataset.
The overall goodness of fit for the models is
moderate, as evidenced by the relatively high R-
squared values of 0.58, 0.54, and 0.48, respectively.
Both the within and between R-squared values also
suggest that the models exhibit a good fit for the
data. Furthermore, the statistical significance of the
models is confirmed by the F-statistic, which
implies that the models are statistically significant at
the conventional alpha level of 0.05.
All of the coefficients in the three models are
statistically significant for the explanatory variables,
as indicated by the probability values in the "P>|t|"
column. Additionally, the confidence intervals for
the coefficients do not include 0, further supporting
the statistical significance of the coefficients.
However, it should be noted that a weak negative
correlation between the residuals and the predicted
values of the ROA suggests that the model
specification may not be fully adequate. Despite
this, an F-test for the null hypothesis of equal group-
level residuals indicates that the group-level
residuals are significantly different from 0.
In summary, the fixed effects panel data models
presented in this study appear to be a good fit for the
data and provide insight into the relationship
between ROA and ROE and CEO change, while
controlling for leverage and firm size.
6 Discussion Conclusion and Future
Research
This study investigates the impact of the CEO's role
on the FP of listed industrial firms in the Amman
Stock Exchange. The authors aim to provide insight
into how the CEO's turnover is affected by the firm's
FP. The study delves into the effect of a new CEO's
appointment in their first year of service, as well as
the effect in the final year of the CEO's tenure, using
financial data from the previous three years. The
study aims to answer the question of whether CEO
turnover is impacted by the FP in the first year of
appointment, the middle period of service, or the
final year of service.
Prior studies have shown that the relationship
between CEO turnover and FP is not
straightforward. Many specific circumstances
WSEAS TRANSACTIONS on BUSINESS and ECONOMICS
DOI: 10.37394/23207.2023.20.186
Ahmad Yousef Kalbouneh, Loona Shahin,
Kasem Aldabbas, Khaled Aburisheh
E-ISSN: 2224-2899
2144
Volume 20, 2023
should be considered for each situation when
evaluating the impact of CEO turnover on FP. In
this regard, our results confirmed the existence of an
inverse relationship between CEO turnover and FP.
In other words, when firms suffer a decline in their
FP, the COE’s position becomes more jeopardized
in listed industrial firms in the Amman Stock
Exchange. In fact, these results are in tandem with
prior findings such as, [32], [33], [36]. Interestingly,
the ROE is a better predictor for this relation than
ROA which indicates that the interest of
shareholders and investors may induce some
pressure for a change when the FP is below
expectations.
As in all research, this study is subjected to
some limitations. The factors, which affect CEO
turnover, are complex and can go beyond FP (e.g.
resignation, retirement, conflicts). In addition, the
study only focused on a specific sector that has its
unique setting and market. Finally, we controlled
some factors that are known to impact this
relationship, however, other factors such as culture,
macroeconomics, metrics, and COVID-19 are also
expected to affect this relationship. Therefore, our
results should be carefully interpreted before any
generalization attempt.
Future research should extend the findings of
this study by considering other sectors and markets,
other factors affecting CEO turnovers such as
culture, macroeconomic factors, and the impact of
COVID-19, the long-term impact of CEO turnover
on FP, the interaction between FP and other factors,
comparative analysis in different countries and
markets, and advancements in methodology and
techniques. By doing so, future research can provide
a more comprehensive understanding of the
relationship between CEO turnover and FP and its
impact on firms, stakeholders, and investors.
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Contribution of Individual Authors to the
Creation of a Scientific Article (Ghostwriting
Policy)
The authors equally contributed in the present
research, at all stages from the formulation of the
problem to the final findings and solution.
Sources of Funding for Research Presented in a
Scientific Article or Scientific Article Itself
No funding was received for conducting this study.
Conflict of Interest
The authors have no conflict of interest to declare.
Creative Commons Attribution License 4.0
(Attribution 4.0 International, CC BY 4.0)
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WSEAS TRANSACTIONS on BUSINESS and ECONOMICS
DOI: 10.37394/23207.2023.20.186
Ahmad Yousef Kalbouneh, Loona Shahin,
Kasem Aldabbas, Khaled Aburisheh
E-ISSN: 2224-2899
2147
Volume 20, 2023