Stock Market Reaction To Chief Marketing Officer Appointment Announcements

Abstract

This paper investigates the stock price performance of 166 firms appointing a new Chief Marketing Officer (CMO) between 1999 and 2005. Following event study methodology, the results reveal that abnormal stock returns around the appointment day are greater for firms appointing a CMO with prior marketing executive experience, in firms where the new CMO explains the intended future marketing strategy on the appointment announcement day, whereas it is lower in firms operating in higher growth, high technology industries with higher product differentiation. Announcement-induced returns are also greater for firms that experienced poor stock price performance in the year leading to the appointment. Taken together, the results suggest that the market’s assessment of a change in marketing leadership should not be viewed as being uniformly beneficial, but should be assessed against the profile of the appointee and the appointing firm.