CEO Turnover and Accounting Earnings: The Role of Earnings Persistence

2020 ◽  
Author(s):  
Inho Suk ◽  
Seungwon Lee ◽  
William Kross
Keyword(s):  
Executive Compensation ◽  
Chief Executive ◽  
Ceo Turnover ◽  
Compensation System ◽  
Earnings Persistence ◽  
Accounting Earnings ◽  
Negative Relation ◽  
Future Performance ◽  
Earnings Performance

Although earnings persistence should have a nontrivial impact on chief executive officer (CEO) turnover decisions, prior studies have paid little attention to the role of earnings persistence in CEO turnover decisions. This study examines the effect of earnings persistence on the sensitivity (i.e., the negative relation) of CEO turnover to earnings performance. First, we find that the sensitivity of forced CEO turnovers to earnings performance is greater when earnings are more persistent. We also show that among numerous earnings attributes, earnings persistence is the most direct and dominant attribute in explaining CEO turnover-earnings sensitivity. Further, when the effect of earnings persistence on CEO compensation-earnings sensitivity is weak, the effect of earnings persistence on CEO turnover-earnings sensitivity is stronger, suggesting that the executive discipline system substitutes for the compensation system when earnings persistence is neglected by compensation policies. Overall, our findings suggest that earnings persistence plays a crucial role in CEO turnover decisions by elevating the board’s knowledge on the future performance implications of current earnings. Finally, the role of persistence is even more crucial when it is neglected by executive compensation policies. This paper was accepted by Shiva Rajgopal, accounting.

Mandatory IFRS Adoption and the Role of Accounting Earnings in CEO Turnover

2018 ◽  
Vol 36 (1) ◽  
pp. 168-197 ◽  
Author(s):  
Joanna Shuang Wu ◽  
Ivy Xiying Zhang
Keyword(s):  
Ceo Turnover ◽  
Accounting Earnings ◽  
Ifrs Adoption

The Explanatory Power of Earnings Levels vs. Earnings Changes in the Context of Executive Compensation

1999 ◽  
Vol 74 (4) ◽  
pp. 459-472 ◽  
Author(s):  
William R. Baber ◽  
Sok-Hyon Kang ◽  
Krishna R. Kumar
Keyword(s):  
Executive Compensation ◽  
Capital Market ◽  
Ceo Compensation ◽  
Formal Analysis ◽  
Explanatory Power ◽  
Earnings Persistence ◽  
Accounting Earnings ◽  
Unexpected Earnings ◽  
The Capital Market

Studies in the capital market context indicate that earnings changes and earnings levels considered jointly provide a more comprehensive representation of unexpected earnings than either earnings changes or earnings levels considered alone. Recent studies of executive compensation demonstrate that executive compensation revisions are greater when earnings innovations are permanent, than when innovations are transitory. Together, these literatures imply that both earnings changes and earnings levels explain revisions to CEO compensation. Specifically, formal analysis implies that weights on earnings changes vary directly with the persistence of earnings innovations and that weights on earnings levels vary directly with persistence for low persistence observations and inversely with persistence for high persistence observations. Evidence for compensation to 712 executives of U.S. corporations is consistent with these expectations. Such results suggest that earnings levels, earnings changes, and earnings persistence need to be considered when investigating relations between accounting earnings and executive compensation.

Corporate governance, CEO turnover and say on pay votes

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ayishat Omar ◽  
Alex P. Tang ◽  
Yu Cong
Keyword(s):  
Corporate Governance ◽  
Chief Executive ◽  
Ceo Turnover ◽  
Content Type ◽  
Compensation Committee ◽  
Say On Pay ◽  
The Usa ◽  
The Impact ◽  
Female Member

Purpose The purpose of this study is to investigate how compensation committee structure or characteristic impacts say on pay (SOP) voting dissent and the impact of SOP dissent on chief executive officer (CEO) turnover. Design/methodology/approach The authors use corporate governance and SOP data to test the relationships amongst variables. Additional analysis is performed using one-to-one propensity-score matched samples. Findings The authors find that firm-years with at least a female member present on the compensation committee are associated with lower SOP dissent. The authors find mixed results of the impact of SOP dissent on CEO turnover. Practical implications This paper suggests that diversity on the compensation committee, particularly the presence of at least a female member on the committee, serves as an important determinant of SOP voting outcome in the USA. The paper provides policymakers and practitioners with insights into factors influencing SOP voting outcomes and implications of SOP dissent for firms. Originality/value The findings of this paper contribute to the corporate governance literature by enhancing the understanding of the role of the compensation committee as it relates to SOP dissent and effect of SOP dissent on CEO turnover.

In retrospect: The influence of chief executive officers’ historical relative pay on overconfidence

2021 ◽  
pp. 147612702110048
Author(s):  
J Daniel Zyung ◽  
Wei Shi
Keyword(s):  
Chief Executive Officers ◽  
Empirical Support ◽  
Chief Executive ◽  
Firm Level ◽  
Self Confidence ◽  
Self Worth ◽  
Executive Officers ◽  
Leadership Research ◽  
The Relationship

This study proposes that chief executive officers who have received over their tenure a greater sum of total compensation relative to the market’s going rate become overconfident. We posit that this happens because historically overpaid chief executive officers perceive greater self-worth to the firm whereby such self-serving attribution inflates their level of self-confidence. We also identify chief executive officer- and firm-level cues that can influence the relationship between chief executive officers’ historical relative pay and their overconfidence, suggesting that chief executive officers’ perceived self-worth is more pronounced when chief executive officers possess less power and when their firm’s performance has improved upon their historical aspirations. Using a sample of 1185 firms and their chief executive officers during the years 2000–2016, we find empirical support for our predictions. Findings from this study contribute to strategic leadership research by highlighting the important role of executives’ compensation in creating overconfidence.

Labor lawsuits and debt maturity

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Omer Unsal
Keyword(s):  
Chief Executive ◽  
Debt Maturity ◽  
Employee Relations ◽  
Short Term ◽  
Content Type ◽  
Negative Effect ◽  
Debt Market ◽  
Legal Fees

Purpose This paper aims to investigate how firms’ relationships with employees define their debt maturity. The authors empirically test the role of employee litigations in influencing firms’ choice of short-term versus long-term debt. The authors study employee relations by analyzing the importance of the workplace environment on capital structure. Design/methodology/approach The author’s test hypotheses using a sample of US publicly traded firms between 2000 and 2017, including 3,056 unique firms with 4,256 unique chief executive officer, adopting the fixed effect panel model. Findings The authors document that employee litigations have a significant negative effect on the use of short-term debt and a significant positive affect on long-term debt. Employee litigations, along with legal fees, outcomes and charging parties, matter the most in explaining debt maturity. In addition, frequently sued firms abandon the short-term debt market and use less shareholders’ equity to finance their operations while relying more on the longer debt market. Originality/value To the best of the authors’ knowledge, this is the first study to examine the role of employee mistreatment in debt maturity choice. The study extends the lawsuit and finance literature by examining unique, hand-collected data sets of employee lawsuits, allegations, violations, settlements, charging parties, case outcomes and case durations.

Does Financial Reporting Conservatism Mitigate Underinvestment?

2017 ◽  
Vol 34 (2) ◽  
pp. 258-283 ◽  
Author(s):  
Hyun A. Hong ◽  
Yongtae Kim ◽  
Gerald J. Lobo
Keyword(s):  
Information Asymmetry ◽  
Cash Flow ◽  
Financial Reporting ◽  
Cash Flows ◽  
Agency Conflicts ◽  
Negative Relation ◽  
Investment Projects ◽  
External Capital ◽  
Cash Flow Volatility

This study examines the role of financial reporting conservatism in mitigating underinvestment problems. Recognizing that volatile cash flows increase the need to access external capital markets and that agency conflicts and information asymmetry make external capital costlier than internal capital, which leads managers to forgo valuable investment projects, Minton and Schrand document a negative relation between cash flow volatility and investment. We draw on Minton and Schrand’s framework to isolate underinvestment problems and hypothesize and document that conservatism mitigates the negative relation between cash flow volatility and investment and that this mitigative effect is more pronounced for firms with ex ante more severe agency conflicts. We also document that conservatism mitigates the sensitivity of investment to cash flow volatility by facilitating access to external capital.

Shopping for Clothes and Sensitivity to the Suffering of Others: The Role of Compassion and Values in Sustainable Fashion Consumption

2017 ◽  
Vol 50 (10) ◽  
pp. 1119-1144 ◽  
Author(s):  
Sonja Maria Geiger ◽  
Johannes Keller
Keyword(s):  
Psychological Research ◽  
Survey Study ◽  
Proenvironmental Behavior ◽  
Environmentally Responsible Behavior ◽  
Negative Relation ◽  
Responsible Behavior ◽  
Environmentally Responsible ◽  
Sustainable Fashion ◽  
Purchase Criteria

The positive relation of biospheric and altruistic values as well as the negative relation of egoistic and hedonic values to environmentally responsible behavior, are established findings in environmental psychological research. Recent findings revealed that compassion, the sensitivity to the suffering of other individuals, is also relevant for proenvironmental intentions. We tested the role of compassion in combination with universal altruistic, biospheric, egoistic, and hedonic values concerning an environmentally responsible behavior with an explicit social and hedonic component: sustainable fashion consumption. In a large survey study ( n = 981), we found that compassion was positively linked to sustainable purchase criteria. The manipulation of compassion in an online study ( n = 197) resulted in a small, positive effect on the willingness to pay extra for fair trade clothes. Moreover, we found that hedonic values showed a consistent negative relation to sustainable fashion consumption in both studies, thus corroborating former research on the critical relevance of hedonic values in the context of proenvironmental behavior.

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