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CEO Turnover and Properties of Accounting Information

38 Pages Posted: 17 Feb 2003  

Ellen Engel

University of Chicago Booth School of Business; University of Illinois at Chicago - College of Business Administration

Rachel M. Hayes

University of Utah - David Eccles School of Business

Xue Wang

Ohio State University - Fisher College of Business

Multiple version iconThere are 2 versions of this paper

Date Written: May 14, 2003

Abstract

Multiple-performance-measure agency models predict that optimal contracts should place greater reliance on performance measures that are more precise and more sensitive to the agent's effort. We apply these predictions to CEO retention decisions. First, we develop an agency model to motivate proxies for signal and noise in firm-level performance measures. We then document that accounting information appears to receive greater weight in turnover decisions when accounting-based measures are more precise and more sensitive. We also present evidence suggesting that market-based performance measures receive less weight in turnover decisions when accounting-based measures are more sensitive or market returns are more variable.

Keywords: contracting, CEO turnover, executive incentives, agency theory, properties of earnings

JEL Classification: J33, J41, M41, M51

Suggested Citation

Engel, Ellen and Hayes, Rachel M. and Wang, Xue, CEO Turnover and Properties of Accounting Information (May 14, 2003). JAE Boston Conference 2002. Available at SSRN: https://ssrn.com/abstract=368300 or http://dx.doi.org/10.2139/ssrn.368300

Ellen Engel (Contact Author)

University of Chicago Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-834-0966 (Phone)
866-377-52152 (Fax)

University of Illinois at Chicago - College of Business Administration ( email )

601 South Morgan Street
11th Floor
Chicago, IL 60607
United States
312-413-3418 (Phone)

Rachel M. Hayes

University of Utah - David Eccles School of Business ( email )

1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States

Xue Wang

Ohio State University - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States
614-688-1330 (Phone)
614-292-2118 (Fax)

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