Real earnings management around CEO turnovers
Geertsema, Paul Lont, David H. Lu, Helen
Geertsema, Paul
Lont, David H.
Lu, Helen
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Publication Type
Journal article with impact factor
Editor
Supervisor
Publication Year
2020
Journal
Accounting & Finance
Book
Publication Volume
60
Publication Issue
3
Publication Begin page
2397
Publication End page
2426
Publication NUmber of pages
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Abstract
Following CEO turnovers, US firms adjust real business activities to manage earnings downwards (REM bath). This effect is most pronounced in firms with low levels of institutional ownership. REM baths early in CEOs’ tenure can be confounded with legitimate adjustments to business activities. However, we show that they are not accompanied by increases in R&D or capital expenses, nor are they explained by restructuring expenses. CEOs with short tenure record more negative REM measures in their first year of tenure, when compared with CEOs with long tenure.
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Keywords
CEO Turnover, Real Earnings Management, Abnormal Operating Performance, Discretionary Accruals