International Journal of Applied Economics, Finance and Accounting ISSN 2577-767X Vol. 4, No. 1, pp. 15-21 2019 DOI: 10.33094/8.2017.2019.41.15.21 © 2019 by the authors; licensee Online Academic Press, USA 15 © 2019 by the authors; licensee Online Academic Press, USA Does CEO Turnover Affect Stock Market Performance through Company Performance in Indonesian Companies? Nera Marinda Machdar 1 1 Institute Teknologi dan Bisnis Kalbis Faculty of Business, Department of Accounting, Jalan Pulomas Selatan Kav.22, Jakarta 13210, Indonesia. Licensed: This work is licensed under a Creative Commons Attribution 4.0 License. Keywords: CEO turnover Stock market performance Company performance Abnormal return Tobin’s Q JEL Classification: M5; L1; G3. Abstract This study analyzes whether CEO turnover affects stock market performance through company performance in Indonesian companies. Specifically, this study examines: (1) Does the CEO turnover affect the stock market performance? (2) Does the CEO turnover affect the company performance and (3) Does the CEO turnover affect the stock market performance through the company performance? This study does not test the CEO turnover due to death, forced resignation, voluntary departures, and age-related retirement considering that almost all companies in Indonesia are family companies. This study uses the manufacturing companies listed on the Indonesia Stock Exchange as an analysis unit with the study period during 2010-2015. The finding of this study concludes that (1) the CEO turnover has a positive effect on the stock market performance, (2) the CEO turnover has a positive effect on the company performance, and (3) the CEO turnover does not affect the stock market performance through the company performance. This study has an implication from a theoretical perspective, i.e. the CEO turnover has a positive effect on the stock market performance and the company performance. However, CEO turnover does not affect the stock market performance through company performance. Then, the company performance is not an intervening variable of the effect of the CEO turnover on the stock market performance. Funding: This study received no specific financial support. Competing Interests: The author declares that there are no competing interests regarding the publication of this paper. 1. Introduction The Chief Executive Officer (CEO) holds the highest executive position in the company. CEO is responsible for the stability of the company. The CEO makes the most strategic decisions and responsible for the company's operations and the company's stability. The CEO affects directly on the allocation of the company’s resources. Strategic decisions include entering new markets, launching new products, or rearranging company structures (Mutwiri, 2013). Datta and Rajagopalan (1998) infer that characteristics such as tenure, age, education level, and functional background are components of a knowledge base for the chief executive officer. It means that a composition of CEO characteristics that can be observed and quantified such as education and work experience, and characteristics unobservable and unquantifiable e.g. leadership skills and team development (Bhagat, Bolton, & Subramanian, 2010). Indonesia has a two-tier board system, namely: Board of Directors and Board of Commissioners (Setiawan, Phua, Chee, & Trinugroho, 2017). In Indonesia, The CEO is the chairman of the Board of Directors. CEO turnover is an important event in the life of the company (Clayton, Hartzell, & Rosenberg, 2005). Many factors can influence CEO turnover decisions including accounting performance, stock performance, organizational factors, mergers and acquisitions, CEO personality, and audits. Furthermore, some researchers revealed other factors that influence CEO turnover, namely CEO share ownership (Denis & Denis, 1995) the composition of the board of directors, and equity compensation (Balsam & Miharjo, 2007). CEO turnover is done by the board of directors before or after the term ends. Changes in CEOs that are made before the end of the term of office can be caused by death, or cannot reach the company's