Market Reaction To The Board Leadership Structure Change

Our study sample consists of China’s A share Listed firms which announced theboard structure change within2006to2011.Empirical research is divided into twosteps. Firstly, examine whether such events will trigger CAR in the event window byusing the event study method.And then individually examine the impact of the boardstructure change, the reason of change and successor’s government connection onCAR.This paper has following conclusions:(1) From the overall, the event can triggera significantly negative CAR in event window. And if we split the sample tounity-duality and duality-unity groups,we find duality-unity group can triggersignificantly negative CAR,while we just find non-significantly positive CAR in theunitary-duality group;(2) the market reaction to the unity-duality group issignificantly more positive according to the result of regression;(3)the marketreaction to non-routine change is significantly more positive;(4) the successor’sgovernment connection score is negatively correlated with the market reaction.Based on the study, this paper gives the following proposals:the listed firmsshould improve the mechanism of information disclosure, adopt a fit board leadershipstructure and focus on top manager’s managerial abilities,not barely on hisgovernment connection.