Mandatory IFRS Adoption and the Role of Accounting Earnings in CEO Turnover
55 Pages Posted: 15 Jul 2016 Last revised: 12 Dec 2017
Date Written: November 30, 2017
We study whether mandatory adoption of International Financial Reporting Standards (IFRS) is associated with changes in the sensitivity of CEO turnover to accounting earnings and how the impact of IFRS adoption varies with country-level institutions and firm-level incentives. We find that CEO turnover responds more to a firm’s accounting performance after adoption. This increase in turnover-to-earnings sensitivity is concentrated in countries with stronger enforcement of financial reporting and is more prominent for mandatory adopters that have strong firm-level compliance incentives. In addition, we link the change in turnover-to-earnings sensitivity directly to accounting changes due to IFRS adoption and find a stronger adoption effect when firms report large overall accounting changes and large de-recognition of loss provisions upon adoption. Some of the above findings are sensitive to the exclusion of UK firms, which account for more than half of our sample.
Keywords: IFRS, CEO turnover, turnover-performance sensitivity, enforcement
JEL Classification: J33, J41, J63, M41, M44, M47
Suggested Citation: Suggested Citation