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CEO and CFO Career Penalties to Missing Quarterly Analysts Forecasts

42 Pages Posted: 29 Jun 2008 Last revised: 12 Aug 2012

Richard Mergenthaler Jr.

University of Iowa - Henry B. Tippie College of Business

Shivaram Rajgopal

Columbia Business School

Suraj Srinivasan

Harvard Business School

Date Written: August 10, 2012

Abstract

This study examines whether the board of directors penalizes CEOs and CFOs in the form of bonus cuts, fewer equity grants, and forced turnover for the act of barely missing the latest consensus analyst forecast and whether such penalties are consistent with efficient contracting or fixation. We find that CEOs are penalized when they just miss the latest consensus analyst forecast via bonus cuts, fewer equity grants, and forced turnover. CFOs are also penalized for just missing the latest consensus analyst forecast via bonus cuts and forced turnover, but do not appear to be penalized with fewer equity grants. Further, we find evidence suggesting that the penalties levied by the board for just missing the latest analyst forecast are more consistent with fixation than efficient contracting.

JEL Classification: G29, J33, G34, M41, M45, G38

Suggested Citation

Mergenthaler, Richard and Rajgopal, Shivaram and Srinivasan, Suraj, CEO and CFO Career Penalties to Missing Quarterly Analysts Forecasts (August 10, 2012). Available at SSRN: https://ssrn.com/abstract=1152421 or http://dx.doi.org/10.2139/ssrn.1152421

Richard Dean Mergenthaler Jr.

University of Iowa - Henry B. Tippie College of Business ( email )

108 Pappajohn Business Building
Iowa City, IA 52242-1000
United States
319-335-0848 (Phone)

Shivaram Rajgopal (Contact Author)

Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

Suraj Srinivasan

Harvard Business School ( email )

Soldiers Field
Boston, MA 02163
United States

HOME PAGE: http://drfd.hbs.edu/fit/public/facultyInfo.do?facInfo=pub&facId=10700

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