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http://ssrn.com/abstract=1670116
 
 

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Executive Turnover Following Option Backdating Allegations


Jap Efendi


University of Texas at Arlington

Rebecca Files


University of Texas at Dallas

Bo Ouyang


Penn State Great Valley

Edward P. Swanson


Texas A&M University - Mays Business School

June 22, 2012

The Accounting Review (January 2013): 75-105.

Abstract:     
We find the likelihood of forced turnover in the CEO and CFO positions is significantly higher in the aftermath of option backdating than in propensity-score-matched control firms. Forced turnover occurs in about 36 percent of the accused firms. The forced turnover rates for CEOs and CFOs are similar and several times higher than normal. The displaced managers are further punished by the managerial labor market, as they are much less likely than control firm managers to be rehired at comparable positions. We also find that backdating firms restructure CEO compensation to rely less on stock options. Finally, we learn the higher turnover extends to the General Counsel. While boards are often viewed as unresponsive to criticisms involving executive compensation, they did respond quite decisively to option backdating allegations and the accompanying adverse publicity.

Number of Pages in PDF File: 52

Keywords: Stock Option Compensation, Option Backdating, Executive Turnover, Corporate Governance

JEL Classification: M41

Accepted Paper Series


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Date posted: September 1, 2010 ; Last revised: May 30, 2014

Suggested Citation

Efendi, Jap and Files, Rebecca and Ouyang, Bo and Swanson, Edward P., Executive Turnover Following Option Backdating Allegations (June 22, 2012). The Accounting Review (January 2013): 75-105.. Available at SSRN: http://ssrn.com/abstract=1670116 or http://dx.doi.org/10.2139/ssrn.1670116

Contact Information

Jap Efendi (Contact Author)
University of Texas at Arlington ( email )
415 S West St Apt no 205
Arlington, TX 76019
United States
Rebecca Files
University of Texas at Dallas ( email )
P.O. Box 830688
Richardson, TX 75083-0688
United States
Bo Ouyang
Penn State Great Valley ( email )
30 E. Swedesford Road
Malvern, PA 19355
United States
6106483371 (Phone)
Edward P. Swanson
Texas A&M University - Mays Business School ( email )
430 Wehner
College Station, TX 77843-4353
United States
979-845-8970 (Phone)
979-845-0028 (Fax)
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