The Effect of Earnings Management on CEO Turnover
Date Issued
2010
Date
2010
Author(s)
Ku, Pei-Chen
Abstract
This study examines the effects of earnings components, especially the parts of earnings management, on the probabilities of CEO turnover. Prior studies classify earnings management into two broad categories: accruals-based and real earnings management. The results show that the incremental effect of discretionary accounting accruals on CEO turnover likelihood is positive but insignificant. Giving abnormally generous price discounts or lenient credit terms also increases the likelihood of CEO turnover but still statistically insignificant. However, reducing discretionary expenses can significantly decrease the probability of CEO turnover. This lower CEO turnover probability suggests that boards do not punish the earnings management through reducing discretionary expenses. Finally, the results show no significant relation between the CEO turnover and the real earnings management by overproduction.
Subjects
CEO turnover
Accrual Earnings Management
Real Earnings Management
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