Internal corporate governance, CEO turnover, and earnings management

Sonali Hazarika, Jonathan Karpoff () and Rajarishi Nahata

Journal of Financial Economics, 2012, vol. 104, issue 1, 44-69

Abstract: 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 (search for similar items in EconPapers)
JEL-codes: G38 K22 K42 M41 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (148)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:104:y:2012:i:1:p:44-69

DOI: 10.1016/j.jfineco.2011.10.011

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