Internal corporate governance,CEO turnover,and earnings management |
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Authors: | Sonali Hazarika Jonathan M. Karpoff Rajarishi Nahata |
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Affiliation: | 1. Baruch College, City University of New York, United States;2. Foster School of Business, University of Washington, United States |
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Abstract: | The likelihood and speed of forced CEO turnover – but not voluntary turnover – are positively related to a firm's earnings management. These patterns persist in tests that consider the effects of earnings restatements, regulatory enforcement actions, and the possible endogeneity of CEO turnover and earnings management. The relation between earnings management and forced turnover occurs both in firms with good and bad performance, and when the accruals work to inflate or deflate reported earnings. These results indicate that boards tend to act proactively to discipline managers who manage earnings aggressively, before the manipulations lead to costly external consequences. |
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Keywords: | G38 K22 K42 M41 |
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