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Earnings Guidance Following Top Executive Turnovers

Francois Brochet
Harvard Business School

Lucile Faurel
University of California, Irvine

Sarah E. McVay
University of Utah


May 22, 2009

AAA 2008 Financial Accounting and Reporting Section (FARS) Paper

Abstract:     
We investigate the impact of top executive (CEO and CFO) turnovers on the provision of earnings guidance to shed light on the manager-specific element of earnings guidance. We find that, on average, firms are less likely to provide earnings guidance in the quarters following executive turnovers. Breaks in guidance following CEO turnovers are relatively permanent (they persist in similar magnitudes for the two years following the turnover), whereas breaks following CFO turnovers are concentrated in the first two quarters following the turnover. Only among CFOs do we find that the background of the newly appointed CFO systematically affects the likelihood of providing guidance and the precision of any guidance provided. We conclude that new CEOs appear to institute disclosure policy changes, while new CFOs appear to temporarily halt guidance because they lack sufficient knowledge about the firm to effectively compile or disseminate guidance.

Keywords: Earnings guidance, Management guidance, Managerial expertise, Managerial knowledge, Executive turnover, CEO turnover, CFO turnover

JEL Classifications: G34, M41, M45, J44

Working Paper Series

Date posted: September 12, 2007 ; Last revised: May 26, 2009

Suggested Citation

Brochet, Francois, Faurel, Lucile and McVay, Sarah E., Earnings Guidance Following Top Executive Turnovers (May 22, 2009). AAA 2008 Financial Accounting and Reporting Section (FARS) Paper. Available at SSRN: http://ssrn.com/abstract=1014065


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Contact Information

Francois Brochet (Contact Author)
Harvard Business School ( email )
Soldiers Field Road
Morgan Hall 369
Boston, MA 02163
United States
617 495 9329 (Phone)
Lucile Faurel
University of California, Irvine ( email )
The Paul Merage School of Business
SB 442
Irvine, CA 92697
United States
1-949-824-0020 (Phone)
Sarah E. McVay
University of Utah ( email )
1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States
801 585 5263 (Phone)
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