 Do New Brooms Sweep Clean? Evidence that New CEOs Take a ‘Big Bath’ in the Banking IndustryChung-Hua Shen and Chien-An Wang Journal of Emerging Market Finance, 2019, vol. 18, issue 1, 106-144 Abstract: This study investigates whether significant changes exist in providing loan losses and loan charge-offs during turnovers of chief executive officers (CEOs). Providing loan losses is referred to as a ‘big bath in earnings’, and providing loan charge-offs is referred to as a ‘big bath in asset quality’. We classify CEO turnovers into three types, namely, forced and voluntary CEO turnovers in privately owned banks (POB), turnovers in government-owned banks (GOB) and turnovers as outcomes of mergers and acquisitions (M&As). Using findings based on the data of Taiwanese commercial banks, we demonstrate that the forcibly appointed CEOs exhibit big baths in earnings and asset quality, whereas the voluntarily appointed CEOs exhibit a big bath in earnings but not in asset quality. Compared with the CEO turnover in a POB, the appointed CEO in a GOB shows no big bath in either earnings or asset quality. Moreover, turnovers resulting from M&As do not induce big baths. JEL Classification: C23, G21, G28, M41, M48 Keywords: CEO turnover; earnings management; big bath; loan loss provision; charge-offs (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:sae:emffin:v:18:y:2019:i:1:p:106-144 Access Statistics for this article More articles in Journal of Emerging Market Finance from Institute for Financial Management and Research |
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