Abstract

https://ssrn.com/abstract=2784490
 


 



Explaining CEO Retention in Misreporting Firms


Messod Daniel Beneish


Indiana University - Kelley School of Business - Department of Accounting

Cassandra D. Marshall


University of Richmond - Department of Finance

Jun Yang


Indiana University - Kelley School of Business - Department of Finance

May 10, 2016

Journal of Financial Economics (JFE), Forthcoming

Abstract:     
We propose a framework that advances our understanding of CEO retention decisions in misreporting firms. Consistent with economic intuition, outside directors are more likely to fire (retain) CEOs when retention (replacement) costs are high relative to replacement (retention) costs. When the decision is ambiguous because neither cost dominates, outside directors are more likely to retain the CEO when they both benefit from selling stock in the misreporting period. We show that joint abnormal selling captures director-CEO alignment incrementally to biographical overlap. This new proxy operationalizes information sharing and trust, making it useful for studying economic decision-making embedded in social relationships.

Number of Pages in PDF File: 58

Keywords: CEO turnover, CFO turnover, fraud, restatements, insider trading, litigation costs, replacement costs

JEL Classification: G31, G32, G34, M40


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Date posted: May 28, 2016  

Suggested Citation

Beneish, Messod Daniel and Marshall, Cassandra D. and Yang, Jun, Explaining CEO Retention in Misreporting Firms (May 10, 2016). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: https://ssrn.com/abstract=2784490

Contact Information

Messod Daniel Beneish
Indiana University - Kelley School of Business - Department of Accounting ( email )
1309 E. 10th Street
Bloomington, IN 47405
United States
812-855-2628 (Phone)
812-855-4985 (Fax)

Cassandra Dawn Marshall (Contact Author)
University of Richmond - Department of Finance ( email )
1 Gateway Rd
Richmond, VA 23173
United States
Jun Yang
Indiana University - Kelley School of Business - Department of Finance ( email )
1309 E. 10th St.
Bloomington, IN 47405
United States
812-855-3395 (Phone)
812-855-5875 (Fax)

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