BBSA Research Projects (2018)

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Impact of the announcement of senior management changes on company value in the financial sector of the Nairobi Securities Exchange
(Strathmore University, 2018) Jesai, Veronica Akena
This study examines the effect of a senior management change on the share price of a company. Previous international studies have shown mixed and inconsistent results, hence the interest to test if the same would apply in a Kenyan setting. The analysis was performed on a sample of 13 companies listed in the financial sector of the Nairobi Securities exchange that made a senior management change. Announcement between the years 2000 and 2016.The study used an event study approach and the market model, to investigate whether abnormal returns, average abnormal returns and cumulative average abnormal returns were significant. Using the standard event study methodology, statistically insignificant positive and negative abnormal and average abnormal returns were found, while statistically significant positive and negative cumulative average abnormal stock returns were found. From the study findings it became apparent that a senior management change has an impact on actual stock performance in Kenya. A possible recommendation for these listed companies therefore, would be to plan a succession strategy taking these effects into account