The shares fell 40p at one stage but regained ground in afternoon trading to close down 15p at 548p.
Mark Puleikis, textiles analyst at the securities house Smith New Court, fielded dozens of calls from institutional clients with worries about the succession.
'It has always been a concern in the market that the perception of Martin Taylor as a brilliant manager would lead him away,' he said.
Mr Taylor is credited with endowing Courtaulds Textiles with a successful strategy following the demerger in March 1990 of the textiles and chemicals elements of the old combined operation. Since then he has led the textiles operation away from commodity production of cloth, and into areas where the company can add value and widen profit margins.
Mr Taylor was chairman and chief executive of the company. Noel Jervis, director in charge of the fabrics division, will step up to be managing director. Sir Christopher Hogg, who relinquished the chairmanship to Mr Taylor last May, will re-assume the duties of chairman.
Mr Puleikis said Mr Jervis was 'approachable and competent' but other observers expressed doubts about the strength of remaining management.
Anthony Hitchens, formerly the finance director, has only recently moved to oversee manufacturing operations. His replacement, Pippa Wicks, joined the company just five months ago.
'It is hard to see the new leadership being as inspirational as Mr Taylor,' one analyst said.
While news of Mr Taylor's departure startled investors it did not come completely out of the blue. He hinted at the time he took on the chairmanship in May that he would like to play a less active role - perhaps to stay on as a part-time chairman and hand on the role of chief executive. Few expected that he would break his connections entirely.