Earnings Management around Founder CEO Re-appointments and Successions in Family Firms
59 Pages Posted: 29 Aug 2019
Date Written: August 1, 2019
This paper studies CEO re-appointment and succession events in listed family firms with an incumbent family CEO in France, Germany and the UK over 2001-2016. The paper explores whether family firms with a founder CEO are more likely to engage in earnings management pre-event than other family firms and non-family firms. Compared to non-family firms, family firms practice less upward earnings management. Nevertheless, we find evidence of pre-event upward earnings management for firms that re-appoint their founder CEO, but no such earnings management for other family firms. Finally, we also show that the new CEOs in non-family firms engage in upward earnings management after their appointment.
Keywords: earnings management, family firms, founders, socio-emotional wealth, CEO turnover, CEO successions
JEL Classification: G32, G34
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