Earnings Management around Founder CEO Re-appointments and Successions in Family Firms

European Corporate Governance Institute - Finance Working Paper No. 620/2019

European Financial Management, forthcoming, https://doi.org/10.1111/eufm.12307

59 Pages Posted: 29 Aug 2019 Last revised: 13 Jul 2021

See all articles by Marc Goergen

Marc Goergen

IE Business School, IE University; European Corporate Governance Institute (ECGI)

Svetlana Mira

Cardiff University

Iram Fatima Ansari

Cardiff Business School, Cardiff University; College of Economics & Political Science, Sultan Qaboos University

Date Written: August 1, 2019

Abstract

This paper studies reappointment of a chief executive officer (CEO) and succession events in listed family firms with an incumbent family CEO. We explore whether family firms with a founder CEO are more likely to engage in earnings management preevent than other family firms. We find evidence of preevent upward earnings management for firms that reappoint their founder CEO but no for other family firms. These findings suggest that the costs and benefits from earnings management change around founder CEO reappointments in family firms. Investors, auditors, policymakers and regulators should be aware of the temptation of founder CEOs to inflate earnings preceding their reappointment.

Keywords: earnings management, family firms, founders, socio-emotional wealth, CEO turnover, CEO successions

JEL Classification: G32, G34

Suggested Citation

Goergen, Marc and Mira, Svetlana and Ansari, Iram Fatima, Earnings Management around Founder CEO Re-appointments and Successions in Family Firms (August 1, 2019). European Corporate Governance Institute - Finance Working Paper No. 620/2019, European Financial Management, forthcoming, https://doi.org/10.1111/eufm.12307 , Available at SSRN: https://ssrn.com/abstract=3433367 or http://dx.doi.org/10.2139/ssrn.3433367

Marc Goergen (Contact Author)

IE Business School, IE University ( email )

Finance Department
Maria de Molina, 12
Madrid, 28006
Spain

HOME PAGE: http://www.ie.edu/business-school/faculty-and-research/faculty/marc-goergen/

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Svetlana Mira

Cardiff University ( email )

Iram Fatima Ansari

Cardiff Business School, Cardiff University ( email )

Cardiff CF10 3EU
United Kingdom

College of Economics & Political Science, Sultan Qaboos University ( email )

Al Khod, Muscat
Oman

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