Internal Corporate Governance, CEO Turnover, and Earnings Management
60 Pages Posted: 22 Mar 2010 Last revised: 15 Jan 2013
Date Written: October 17, 2011
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.
Keywords: Management turnover, earnings management, corporate governance
JEL Classification: G38, K22, K42, M41
Suggested Citation: Suggested Citation